The rise in Bitcoin price and the reduction in production quantity may offer Bitcoin some bullishness but also make it scarcer than gold.
The chief executive officer (CEO) of digital currency investment firm BKCM LLC Brian Kelly says that Bitcoin (BTC) will be more scarce than gold after the halving. Speaking to CNBC’s Fast Money, Kelly discussed the event expected in April this year, talking about the asset’s scarcity.
Bitcoin Scarcity to Rival Gold’s
In his explanation, Kelly said historical data shows that Bitcoin performs best in the 12-16 months after a halving. However, he warned that Bitcoin may not repeat history this time because prices are higher, and production will halve. Explaining that this is advantageous for Bitcoin’s scarcity, Kelly said:
“This time might be different because the price of Bitcoin is higher [and] we now only have 900 Bitcoin a day that come out [and] that gets cut in half. It’s not a lot of Bitcoin. But, what it does do is it makes Bitcoin more scarce than gold. So, for the first time in history, you have an asset that is more scarce than gold.”
Kelly explains the scarcity using Bitcoin’s stock-to-flow (S2F) ratio, a model created by popular BTC analyst PlanB. The ratio is calculated by dividing Bitocin’s circulating or existing supply by annual production. Kelly points out that compared with gold’s S2F, Bitcoin will become more scarce.
Bitcoin already set a new 2023 all-time high (ATH) on Monday when it hit $42,100. As of this writing, BTC is already at $43,707, climbing 5% in 24 hours and more than 14% in seven days. Interestingly, there are similar gains in Ether (ETH) and Solana (SOL). While ETH has jumped over 10% in seven days, SOL climbed nearly 7% in 24 hours.
Bitcoin Rally May Continue as Market Anticipates ETF Decision
Bitcoin’s rise may be tied to the possibility of the United States Securities and Exchange Commission (SEC) approving a spot Bitcoin ETF in January. The SEC has met with representatives from several ETF applicants, including Grayscale and BlackRock, to discuss their ETF applications. Even though the Commission has repeatedly delayed a decision on approval or rejection, the general consensus is that an approval is very likely. An approval would be interesting because SEC Chair Gary Gensler is a very vocal critic of cryptocurrencies who seems to be behind a lot of the enforcement action happening in the crypto space. The SEC has also avoided approving any proposals received over the last decade, citing fraud and market manipulation as concerns to be addressed.
Bitcoin has so far returned 163% in year-to-date (YTD) gains. The rally in the world’s largest cryptocurrency may be spreading into gold as it is also attracting investors. Buyers usually flock to gold during times of economic or geopolitical uncertainty, which sometimes pumps the price of the yellow metal. On Sunday, the price of gold briefly hit $2,100, a new all-time high. Although it has now fallen below $2,050, analysts believe that gold might be able to keep its price above $2,000.