The inflation of Bitcoin is approaching 0.5%: what this means for the market
Bitcoin inflation, meaning the rate at which new coins are issued, has remained below 1% per year for over two years. If current trends continue, this figure could drop below 0.5% in just two years. For comparison, double-digit annual BTC issuance has not been seen for over a decade. Today, miners receive 3.125 BTC for each block mined, corresponding to an annual supply increase of about 0.8% — noticeably lower than the comparable figure for gold.
However, a second important macroeconomic narrative is also developing in parallel in the market. The ratio of Bitcoin's value to the M1 money supply is confidently breaking through key resistance levels. Against this backdrop, the traditional four-year industry cycle is beginning to seem outdated to investors.
Why Bitcoin Inflation is Decreasing
By Bitcoin inflation, experts mean not a price increase, but the net rate of increase in the total coin supply. For fiat currencies like the ruble or dollar, inflation always means a decrease in purchasing power — central banks print money without limits. In the case of BTC, inflation is a strictly technical, pre-programmed network parameter. It is calculated as the ratio of the number of new coins miners receive for blocks to the already issued volume of cryptocurrency.
The main mechanism for reducing issuance is the regular halving. Every four years, the reward for a mined block is cut exactly in half:
- 2009 — 50 BTC (initial network launch)
- 2012 — 25 BTC (about 12% annual issuance)
- 2016 — 12.5 BTC (about 4%)
- 2020 — 6.25 BTC (about 1.8%)
- 2024 — 3.125 BTC (about 0.8%)
The next halving in spring 2028 will reduce the reward to 1.5625 BTC, and issuance will fall below the 0.5% mark. The maximum supply is strictly limited to exactly 21 million coins. After this limit is reached, the creation of new BTC will cease entirely.
The key difference between cryptocurrency and traditional money is its absolute mathematical predictability. The issuance volumes of dollars or rubles are determined by central bank leadership, and the printing press can accelerate sharply during economic crises. Bitcoin's issuance schedule, on the other hand, is clearly fixed in code for many decades ahead. However, extremely low issuance does not guarantee automatic stabilization of market value — the price of digital gold regularly experiences strong fluctuations. An asset's scarcity does not automatically mean maintaining its stable purchasing power.
Bitcoin vs. M1: A Macroeconomic Perspective
M1 includes the most liquid financial resources — cash and money in current bank accounts. The current ratio of Bitcoin's value to the M1 indicator shows the coin's price not in dollars, but as a share of this volume. This approach effectively removes the distorting effect of the constant expansion of the fiat money supply. The chart is now successfully overcoming crucial historical milestones — the strong resistance from 2018 and the prolonged downtrend of 2025 have finally been broken. These levels are now being actively tested by the market from above as support. If this level holds, long-term growth proponents will receive significant confirmation of the strength of the uptrend.
From the described picture, one can conclude the gradual obsolescence of the classic four-year cycle. Previously, cycles were directly driven by halvings, but now issuance has become too insignificant. Its next reduction has virtually no direct physical impact on market balance — miners have almost no free coins left to sell. For this reason, global macroeconomic factors come to the forefront: the Fed's loose or tight 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 pure investment demand.
My conclusion: The reduction of Bitcoin inflation to 0.5% is not just a technical indicator, but a signal of a fundamental change in market structure. The traditional "halving-boom-correction" cycle is losing relevance. Now, the key driver becomes the macroeconomic environment, and investors should reconsider their strategies, focusing on global liquidity rather than the halving calendar.