Bitcoin inflation drops to 0.5%: what this changes for BTC and the entire market
Bitcoin's inflation rate, meaning the pace at which new coins are created, has remained below 1% annually for over two years. Miners currently receive 3.125 BTC per block mined, with an annual issuance of approximately 0.8%. This is significantly lower than the comparable figure for gold. If the current trend continues, by 2028, after the next halving, inflation will drop below 0.5%.
Unlike fiat currencies, where the printing press can be activated at any moment, Bitcoin's issuance is rigidly fixed in the network's code and predictable for decades ahead. Every four years, the block reward is cut exactly in half. Since the network's launch in 2009, we have gone from 50 BTC to the current 3.125 BTC. The next reduction in the spring of 2028 will lower the reward to 1.5625 BTC and the annual issuance to below 0.5%.
However, low inflation alone does not guarantee price growth. The decisive factor becomes the ratio of Bitcoin's market capitalization to the M1 money supply — that is, the most liquid assets in the economy, including cash and funds in checking accounts. This indicator helps eliminate the distorting effect of constant fiat expansion and assess BTC's real purchasing power.
The BTC/M1 ratio chart is now confidently breaking through key historical resistance levels. The 2018 levels and the prolonged downward trend of 2025 have been successfully overcome. If these levels solidify as support, we will have powerful confirmation of a long-term upward trend. This means the classic four-year cycle, previously directly driven by halvings, is gradually becoming a thing of the past.
Currently, the issuance of new coins is so small that its further reduction has virtually no direct physical impact on market balance. Miners have almost no free coins left to sell. Global macroeconomic factors are taking center stage: Fed policy, overall system liquidity, and capital inflows into spot ETFs. The fewer new coins are issued, the weaker the supply's influence on price dynamics. Ultimately, the asset's value is increasingly determined by net investment demand.
Expert opinion from Cryptalist: We are witnessing a fundamental paradigm shift. Bitcoin is ceasing to be a "cyclical asset" tied to halvings and is transforming into a mature macro instrument, whose value is dictated by global liquidity and institutional demand. For long-term holders, this means that previous strategies of "buy before the halving — sell after" may no longer work. Now, the key is to monitor the money supply and ETF inflows.