Bitcoin inflation is relentlessly declining: what lies behind the drop in issuance to 0.5%
For over two years now, Bitcoin's annual inflation rate has remained below 1%. If current trends continue, this figure could drop below 0.5% in less than two years. This is not just a technical detail—it is a fundamental shift in the asset's economics that changes the rules of the game for all market participants.
By Bitcoin inflation, we mean not a price increase, but solely the rate at which the total number of coins in circulation grows. Unlike fiat currencies, where central banks can print money without limits, BTC issuance is strictly programmed. Today, miners receive 3.125 BTC for each block found, resulting in an annual issuance of about 0.8%—notably lower than the comparable figure for gold, which historically fluctuates around 1.5-2%.
The Reduction Mechanism: Halving as a Deflation Driver
The main driver of declining issuance is the regular halving—an event occurring every four years when the block reward is cut exactly in half. Take a look at the history:
- 2009 — 50 BTC per block (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, pushing issuance below 0.5%. The maximum supply is strictly capped at 21 million coins—once this limit is reached, the creation of new BTC will cease entirely.
Bitcoin vs. M1: A New Perspective on Value
Alongside this, a second important macroeconomic narrative is actively developing in the market. The ratio of Bitcoin's value to the M1 money supply (cash plus checking account balances) is confidently breaking through key resistance levels. This metric removes the distorting effect of constant fiat expansion and assesses the asset's real purchasing power.
Currently, the chart is successfully overcoming crucial historical thresholds—the 2018 resistance and the prolonged 2025 downtrend. If these levels hold as support, long-term growth proponents will gain significant confirmation of the strength of the upward trend.
The Decline of the Four-Year Cycle
From the described picture, a conclusion emerges about the gradual fading of the classic four-year cycle. Previously, cycles were directly driven by halvings, but now issuance has become too insignificant. Its further reduction has almost no direct physical impact on market balance—miners have few 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 pure investment demand.
My conclusion: Bitcoin is entering a new phase of maturity, where its value will be determined less by issuance scarcity and more by real institutional adoption and the macroeconomic context. Inflation dropping below 0.5% is not just a number—it is a signal that classic cyclical models no longer apply.