Crypto news

For over two years, Bitcoin's annual inflation has remained below the 1% mark. If current trends continue, this figure could drop below 0.5% in less than two years. Double-digit issuance was last seen more than a decade ago — today, miners receive only 3.125 BTC for each block found, corresponding to an annual supply increase of about 0.8%. For comparison, this is noticeably lower than the equivalent figure for gold.

Alongside this, another important macroeconomic narrative is unfolding in the market: the ratio of Bitcoin's market capitalization to the M1 money supply is confidently breaking through key resistance levels. Against this backdrop, the traditional four-year cycle tied to halvings is increasingly being viewed by investors as an outdated concept. Let's explore what conclusions can be drawn from these figures.

Why Bitcoin's Inflation Is Steadily Declining

Bitcoin's inflation should be understood not as a price increase, but solely as 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 determined by software code. It is calculated as the ratio of new coins miners receive for blocks to the already issued volume.

The main mechanism for reducing issuance is the regular halving, which occurs every four years and cuts the block reward exactly in half:

The next halving in spring 2028 will reduce the reward to 1.5625 BTC, and issuance will drop below 0.5%. The maximum total supply is strictly limited to 21 million coins, and once 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 decisions and can accelerate sharply during crises. Bitcoin's issuance schedule, on the other hand, is fixed in code for decades ahead. However, extremely low issuance does not guarantee automatic stabilization of market value: an asset's scarcity does not mean its purchasing power will be preserved.

Bitcoin vs. M1: A Paradigm Shift

The M1 indicator includes the most liquid financial resources — cash and money in current bank accounts. The ratio of Bitcoin's market capitalization to M1 allows us to evaluate the coin's price not in dollars, but as a share of this volume, effectively neutralizing the distorting effect of constant fiat expansion.

Currently, this chart is successfully overcoming key 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 top to bottom as support. If this threshold holds, proponents of long-term growth will receive significant confirmation of the strength of the upward trend.

From the described picture, a conclusion emerges about 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 are taking center stage: Fed policy, overall system liquidity, and capital inflows into spot ETFs.

My expert opinion: Bitcoin's inflation dropping to 0.5% is not just a technical milestone, but a signal of a fundamental change in market structure. The asset is becoming less dependent on miner supply and more dependent on pure investment demand. In the long term, this makes Bitcoin a more mature and less volatile instrument, but in the short term, it strengthens its correlation with global money flows. Investors should reconsider their models based on halving cycles and focus on macroeconomic indicators.