The inflation rate of Bitcoin has fallen below 0.5%: what this means for the market and why old cycles are dying
Bitcoin's key macroeconomic parameter — its annual issuance rate — has remained below 1% for over two years. According to my calculations, if current block mining rates persist, this figure will drop below 0.5% in just two years. This is an all-time low that fundamentally changes the perception of BTC as an asset.
It is important to understand: Bitcoin inflation is not a price increase, but a purely technical rate of growth in the total coin supply. Unlike fiat currencies, where central banks can print money without limits, BTC issuance is strictly programmed. Miners currently receive 3.125 BTC per block found, resulting in an annual inflation rate of about 0.8%. For comparison, even gold — a traditional safe-haven asset — has a higher rate.
Why does inflation continue to fall?
The main driver of the decline is the halving. Every four years, the block reward is cut exactly in half. In 2012, it was 25 BTC (annual issuance around 12%), in 2016 — 12.5 BTC (4%), in 2020 — 6.25 BTC (1.8%), and after the 2024 halving, it fell to 3.125 BTC (0.8%). The next halving in spring 2028 will reduce the reward to 1.5625 BTC, pushing issuance below 0.5%.
Bitcoin's maximum supply is strictly capped at 21 million coins. Once this limit is reached, the creation of new BTC will cease entirely. This absolute mathematical predictability sets the cryptocurrency apart from fiat money, whose issuance depends on political decisions.
Bitcoin vs. M1: A paradigm shift
Alongside the decline in inflation, another important macroeconomic narrative is unfolding in the market. The ratio of Bitcoin's value to the M1 money supply (cash + checking account balances) is confidently breaking through key resistance levels. This metric helps eliminate the distorting effect of constant fiat money expansion.
Currently, the chart is successfully overcoming crucial historical thresholds — the 2018 resistance and the prolonged 2025 downtrend. If these levels hold as support, the long-term upward trend will receive significant confirmation.
My conclusion as an analyst: The classic four-year cycle tied to halvings is gradually losing relevance. Issuance has become too insignificant to have a 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. Bitcoin's price is increasingly determined by pure investment demand, rather than mechanical supply reduction. This makes the asset more mature, but also more sensitive to traditional financial flows.