Bitcoin inflation is relentlessly declining: what the market should prepare for
Bitcoin's inflation rate has remained below 1% per annum for over two years. This is not a coincidence, but a natural result of the deflationary model embedded in its protocol. If current rates persist, this figure will drop below 0.5% within two years.
It is important to understand: by BTC inflation, we mean not price growth, but solely the rate of increase in the total number of coins in circulation. Unlike fiat currencies, where central banks can print money without limits, Bitcoin's issuance is strictly deterministic and pre-programmed into the network's code.
The Reduction Mechanism: Halving
Every four years, the reward miners receive for finding a block is cut exactly in half. Today, it stands at 3.125 BTC. The next halving, expected in the spring of 2028, will reduce it to 1.5625 BTC. This will automatically bring the annual issuance rate below 0.5%. For comparison, in 2012 this figure was around 12%, and in 2020 it was approximately 1.8%.
The key difference between Bitcoin and traditional money is its absolute mathematical predictability. The maximum total supply is strictly capped at 21 million coins. Once this limit is reached, the creation of new BTC will cease entirely.
Macroeconomic Context
Alongside the decline in inflation, another important development is unfolding in the market. The ratio of Bitcoin's value to the M1 money supply (the most liquid assets — cash and funds in checking accounts) is confidently breaking through historical resistance levels. This metric helps eliminate the distorting effect of the constant expansion of the fiat money supply.
The chart has successfully surpassed the 2018 resistance level and the prolonged downward trend of 2025. These levels are now being tested from above as support. If this threshold holds, it will provide strong confirmation of the upward trend's strength.
What This Means for Investors
The described picture suggests 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 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 influence of supply on price dynamics. Ultimately, the asset's value is increasingly determined by net investment demand.
My conclusion: Bitcoin is transforming from a cyclical asset into a structural macro instrument. Investors should shift their focus from anticipating halvings to analyzing global liquidity and institutional demand — these are the factors that will shape the price in the coming years.