Two meanings of the word inflation
“Inflation” is used for two different things, and much of the confusion in this topic comes from mixing them.
- Consumer price inflation is how fast the general price level for goods and services rises, usually measured by an index such as the consumer price index.
- Supply inflation is how fast the quantity of a money or asset grows.
The two can be related, but they are not the same. Economists disagree about how closely they track one another, and the link varies by place and period. When people compare Bitcoin’s “inflation rate” with fiat currencies, they usually mean supply growth, and that is the sense used here.
How Bitcoin’s supply growth is calculated
Bitcoin’s issuance is set by a schedule, so the calculation is mechanical. Divide the coins created in a year by the number already in existence.
Since the April 2024 halving, each block creates 3.125 new coins. With about 144 blocks a day, that is around 450 coins a day, and 3.125 x 144 x 365 comes to roughly 164,000 coins a year. At that point, about 19.7 million coins existed, so the annual growth is about 164,000 divided by 19.7 million, or a little over 0.8 percent. These figures are approximate, since block times vary.
Before the 2024 halving, the same calculation gave about twice that, a little over 1.6 percent. At the next halving, expected around 2028, it will roughly halve again, to roughly 0.4 percent. The rate falls each time for two reasons: the subsidy is halved, and the existing supply keeps growing, so the same number of new coins is a smaller share of a larger base. This is the reason the schedule is often described as disinflationary: supply keeps growing, but at a slower and slower rate.
How fiat money supply growth is measured
Fiat money supply has no single number. Central banks and statistics agencies publish several measures, from narrow ones covering physical cash and bank reserves to broader ones that also include bank deposits. Growth rates for these can differ widely, and they have varied over time and between countries.
In calm periods, broad money in large economies has often grown by some low-to-mid single-digit percentage per year, though that range is a loose generalization rather than a rule. In some periods, such as the stimulus following the pandemic in 2020 and 2021, broad measures grew faster in several economies, and in others they shrank. In countries with high consumer price inflation, money supply growth can be far higher. To compare properly, you would pick a specific country, a specific measure and a specific time period and look up the official figures.
What the comparison does and does not tell you
Putting a roughly 0.8 percent figure beside a larger fiat figure invites a tidy conclusion, but there are several caveats.
- Growth is not purchasing power. A currency with 5 percent supply growth may keep stable prices if the economy also grows and demand for money rises. A scarce asset can still lose value if demand falls. Supply is one input, as in the broader idea of supply and demand.
- Fiat supply growth often has a purpose. Central banks aim for a target, commonly around 2 percent consumer price inflation in many advanced economies, and adjust policy using interest rates. Bitcoin’s schedule is fixed and does not respond to conditions, which some see as a strength and others as a weakness.
- Effective supply may differ. Part of the issued supply is lost or dormant, so the growth rate of coins that can actually be traded may differ from the schedule.
- Price is volatile. Bitcoin’s price in dollars moves far more than most fiat currencies’ purchasing power. Low supply growth did not stop large price swings in either direction.
Why the issuance rate matters for discussion
The issuance rate matters because it affects how many new coins miners receive and may sell to cover costs. Whether that creates meaningful selling pressure is uncertain, and what is known about miner selling is limited. Over time, as the subsidy shrinks relative to fee income, the rate will matter less, but this is a long-term outlook, not a forecast.
People also sometimes raise the idea of digital gold, arguing that a predictable supply makes Bitcoin function like a store of value. Gold’s supply grows by new mining at a modest percentage each year too, so the comparison with it is closer than with fiat. Whether Bitcoin has earned that role is debated and is not settled by supply data alone.
Takeaway
Bitcoin’s supply growth can be calculated precisely and is currently below one percent per year, falling over time. Fiat money supply growth depends on the measure, the country and the year, so any single comparison number should be checked against the official source. Neither figure predicts price. Cryptocurrency prices are volatile, past performance does not predict future results, and you can lose all you invest. This is educational content and not financial, tax or legal advice.