Inflation and Deflation in Bitcoin
Inflation is a feature of fiat money — central banks target 2% per year, which means your money loses half its value every 36 years by design. Bitcoin flips this: its supply growth decreases over time, making each coin relatively more scarce.
Bitcoin’s supply growth is predictable and decreases over time. That means fewer new coins each year (disinflation), trending toward zero inflation.
Simple definitions:
- •Inflation (money): When the money supply grows, each unit buys less.
- •Disinflation: Inflation that is slowing down.
- •Deflation: Prices of goods fall over time.
- •Hard cap: Bitcoin’s maximum of 21 million coins.
Bitcoin is disinflationary — its supply growth rate decreases with each halving and approaches zero. This means holding Bitcoin becomes more attractive over time, while holding fiat becomes less attractive.
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