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Bitcoin (BTC) revolutionized the financial world by offering a capped supply inflation of a digital asset for the first time in human history. Since then, thousands of cryptocurrencies surged with different supply inflation dynamics.
Notably, cryptocurrency prices depend on both its supply inflation and the market demand for the coin or token. A high demand for a limited supply makes the price go up against other currencies, while a higher supply increase than what is demanded will make the price fall.
Essentially, supply inflation is the rate at which new coins or tokens are added to cryptocurrencies’ circulating supply. This inflation rate is usually measured by dividing the amount of coins that will be added yearly by its current circulating supply.
A simple application of this theory is watching how much the price of a given cryptocurrency will be, within the same market capitalization, after a period of one year (or more). Interestingly, the expected price drops as inflation adds new coins to its circulating supply.
GPT-4 recommends 3 cryptocurrencies less affected by supply inflation
In this context, Finbold turned to a GPT-4 API bot to calculate cryptocurrencies’ yearly supply inflation. More so, the ChatGPT bot offered a list of some of the lowest rates among the most well-known decentralized money in the space.
“Recommend three cryptocurrencies with the lowest yearly supply inflation rate. Justify your picks by informing what their real average yearly supply inflation is.”
— Prompt by Finbold
Nano (XNO)
The first pick is Nano (XNO), with a 0% yearly supply inflation rate. This cryptocurrency has a circulating supply of 133.24 million XNO, resulting in a $93.27 million market cap at current prices ($0.70).
Notably, all units of Nano created in the genesis block are already circulating, which means no supply inflation for this low-cap cryptocurrency.
Nevertheless, Nano has not seen a consistent demand increase since November 2022. XNO lost 11.4% of its value in a year, despite having the lowest supply inflation in the cryptocurrency market.
The above result evidences the importance of a growing demand for value appreciation, from which any meaningful growth could trigger a bullish trend by the lack of extra selling pressures.
Monero (XMR)
ChatGPT-4 picked Monero (XMR) as the cryptocurrency with the second lowest supply inflation. Monero implemented a tail emission in May 2022 of 0.6 XMR per block.
Considering a new block is mined every two minutes, 423 XMR are mined daily, resulting in 157,680 XMR added yearly to Monero’s circulating supply. This results in a 0.86% inflation rate for 18.35 million coins in circulation at the time of publication.
Monero is changing hands by $169 per coin, with yearly gains of 6.96% from $158 per coin in November 2022. This shows an increased demand for the privacy-focused cryptocurrency, despite its supply inflation.
Bitcoin (BTC)
Meanwhile, Bitcoin has the largest supply inflation among these three ChatGPT-4 picks but is still one of the cryptocurrencies with the lowest yearly rates in the market. With a current emission of 6.25 BTC per block every 10 minutes, 900 BTC enters the circulating supply daily.
By the end of 2023, 328,500 BTC will start circulating in 365 days. For a yearly rate of 1.68% inflation in a current circulating supply of 19.53 million BTC ($678.14 billion market cap).
Interestingly, Bitcoin saw a massive demand growth in one year, registering 64% gains from $21,150 to $34,723 by press time. Moreover, its supply inflation will be cut by half in 2024 through the block subsidy halving.
However, it is important to say that Bitcoin would trade at $66,666 if BTC hits its all-time high market cap. This would mean a price 3.44% lower than its all-time high price of $69,045 at the same capitalization in 2021.
All things considered, having good supply fundamentals is not enough for mid-term positive results in the cryptocurrency market. Demand plays an important role for cryptocurrencies, whether for speculative or utility reasons.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.