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Bitcoin is both beloved and vilified around the world. Millions of people use it on a daily basis for saving, investing, and payments while thousands more trumpet Bitcoinâs benefits to everyone who will listen. Bitcoin does however have some highly vocal and visible critics, not least of which is Jamie Dimon, the CEO of JP Morgan.
Dimon is no fan of Bitcoin, that much we know for sure. In early 2017, he indicated that he believed that Bitcoin was a fraud and, shortly thereafter, threatened to fire anyone at his company who was caught trading or otherwise handling it. Rather aggressive in his bearishness if you ask me.
Youâd be forgiven though for assuming that recent developments in the space would have improved his opinion. After all, a country has recognized Bitcoin as legal tender and several other countries have approved exchange-traded products that are tied to Bitcoin. All that on top of the fact that Bitcoin has seen essentially infinite returns since its creation.
Endless evidence of Bitcoinâs immense value and adoption doesnât seem to have swayed Dimon. At an event earlier this week, he reiterated his belief that Bitcoin is âworthlessâ and went so far as to make an absurd challenge against one of its most core features: the twenty-one million coin supply cap.
21 Million: Set In Stone
If youâve spent any time researching Bitcoin, then itâs almost guaranteed that youâve heard about Bitcoinâs supply cap. While critics like Jamie Dimon may not believe it, the fact that no more than twenty-one million Bitcoin can ever exist has been set in stone within Bitcoinâs base software code:
For those who arenât programmers, the code above controls two features of Bitcoin, the block subsidy and the halvings, that together determine Bitcoinâs supply cap. Letâs take a brief look at each feature:
Halving
Bitcoinâs software code helps ensure that supply inflation decreases over time by cutting the issuance rate of new Bitcoin in half every 210,000 block confirmations. It takes a little less than four years for 210,000 blocks to be confirmed.
Block Subsidy
A certain number of Bitcoin are released every time a block on its blockchain is confirmed, which happens every ten minutes on average. When Bitcoinâs blockchain first started, 50 new Bitcoin were released every time a block was confirmed. Since Bitcoin has already gone through three halvings since then, the current block subsidy is 6.25 new Bitcoin with every block.
As we can see within Bitcoinâs code, the block subsidy will be completely eliminated (i.e., drop to zero per block) after sixty-four halvings have occurred. Twenty-one million Bitcoin will have been released by that point.
Iâve created this table to help you visualize how the halvings and block subsidies guarantee the 21 million Bitcoin supply cap
Why Does Bitcoinâs Supply Cap Matter?
Bitcoinâs supply cap is revolutionary because it ensures scarcity. And scarcity matters because of its fundamental contribution to an assetâs ability to retain value over time. For example, have you thought about why works of art like The Mona Lisa and Starry Night have gone up in value so much over hundreds of years? Itâs because there can only ever be one true original.
The revolution lies in the fact that such a definitively scarce monetary asset like Bitcoin has never existed before. Gold, silver, and other precious metals are relatively scarce. But we donât know how much is in the earth or elsewhere waiting for us to discover it. And fiat currencies are the opposite of scarce. In the nearly two years since the global COVID pandemic began, the governments of the world have collectively printed trillions of dollarsâ worth of their currencies.
Essentially, both fiat currencies and precious metals fall short:
Governments around the world will print their fiat currencies into oblivion and theyâll then give out the newly printed money to themselves, banks, other countries, or select groups of citizens that theyâve identified. In other words, most people wonât benefit at all from the newly printed money.
Miners of precious metals receive exclusive rights to mine from governments. Additionally, those miners can increase the new supply of the metal by investing more in their business. Mining gold also requires that you know where to look for it while mining Bitcoin just requires a computer and the publicly available software code.
Bitcoinâs supply cap makes it inherently better than both forms of money above, as well as every other form of money used up to this point in history. No government, company, or person can change Bitcoinâs supply cap, nor can any level of investment by miners.
Look At His Actions, Not His Words
Whether or not Jamie Dimon chooses to accept Bitcoin, the fact remains that it is here to stay. And even though heâs verbally attacking Bitcoin, his actions and the actions of the bank he runs speak volumes.
Case in point: JP Morgan began giving access to crypto funds to many of its wealth management clients in July of this year and then publicly stated that institutions are starting to prefer Bitcoin over gold as an inflation hedge just a few days ago.
JP Morganâs reasoning? Its clients want to buy Bitcoin and other cryptocurrencies and so the bank will do its part to facilitate access for them.
In other words, follow the (Bitcoin) money.
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