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Home Blog Deflationary Cryptocurrencies are promising assets in a high inflation environment. Scarce asset pri
Article by Yunis
22 July 2022 (Updated 27 November 2022)

Deflationary Cryptocurrencies are promising assets in a high inflation environment. Scarce asset prices tend to go up in long term with flourishing use cases.

"The Times 03/Jan/2009 Chancellor on brink of second bailout for banks." This quote is from a newspaper and embedded on the Bitcoin genesis block - block 0 by Satoshi Nakamoto to criticize the monetary policies.
Deflationary Cryptocurrencies as an Anti-Inflation Asset logo
  • Bitcoin maximum supply is 21 million only.
  • Binance buys and burns BNB every quarter.
  • Ethereum became more deflationary after EIP-1559 improvement.
  • Matic became more deflationary after Ether's EIP-1559

"The Times 03/Jan/2009 Chancellor on brink of second bailout for banks."
This quote is from a newspaper and embedded on the Bitcoin genesis block - block 0 by Satoshi Nakamoto. It was right after the 2008 mortgage crisis, and central banks were announcing their plans to bail out the failed banks. The plan was simple; to print more money and inject it into the markets. The Fed almost quintupled its bond holdings and reached the largest amount in the central bank's history. Other major central banks like the European Central Bank (ECB), Bank of England (BoF), and Bank of Japan (BoJ) followed the same path.

The history was repeated during the pandemic. Central banks decided to print more money to keep the economy floating. According to the official statistics, the Fed increased the total bond holdings to the largest in its history by almost tripling the balance sheet size. There is now more money on earth than ever. The result is predictable. According to News, the world's top richest men doubled their wealth in the pandemic.

What is Deflationary Cryptocurrency?

Deflationary coins have a limited maximum supply, and the supply of coins will stay stable or decrease over time. Bitcoin is a deflationary cryptocurrency because it has a maximum supply of 21 million. When the last Bitcoin is mined, no new Bitcoins will be created.

 

The price of scarce assets is expected to increase over time. Deflationary cryptocurrencies have limited supply, and they are scarce. The more use of a blockchain network increase, the more the price of the native coin will rise. Bitcoin is the leading deflationary cryptocurrency. Other leading cryptocurrencies with a deflationary character are BNB, Ethereum, and Matic. You can read more about those top deflationary coins below;

Bitcoin

Bitcoin's maximum supply is 21 million. A little over 19 million Bitcoin have been mined and is in circulation now. Miners supply new Bitcoins, and 900 new Bitcoins are mined every day in 2022, which is equal to 1.8% annual increase. There will be a halving in 2024, and the supply from Bitcoin mining will be reduced in half. Expected Bitcoin inflation will be less than 1% after 2024 halving. The remaining last 2 million Bitcoin will be mined until 20140. Bitcoin is a very scarce asset.

BNB

BNB is the native cryptocurrency of the Binance Smart Chain created by the Binance Exchange. BNB coins initially had a maximum supply of 200 million coins. The Binance cryptocurrency exchange company burns BNB coins after every financial quarter. Binance buys BNB coins and burns them in a certain portion of their revenue. The company will continue burning until the maximum supply of BNB reaches 100 million.

Ethereum

Ether, the native coin of Ethereum, was initially created as an inflationary coin. Ethereum blockchain implemented a new application called EIP-1559 and became deflationary in August 2021. The network distributes miners fewer coins and burns some of the coins collected as gas fees. The supply of Ether depends on the network activity, but even now, we can see that the network is burning more than it creates.

MATIC

Polygon Network is a prominent Ethereum scaling project, and Matic is the network's native token. Matic's maximum supply is 10 Billion tokens. But the total supply is decreasing over time because of the burning mechanism that came after EIP-1559 development on the Ethereum blockchain. Approximately 0.27% of MATIC's supply will be burnt every year. There is 80 Billion Matic in circulation now.

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