When Satoshi Nakamoto invented Bitcoin, the creator designed the protocol to be an inflationary currency, one that is predictable as bitcoin’s inflation always decreases every four years. Today, 77 days before the reward halving, BTC’s inflation rate is around 3.6% and it’s expected to drop to 1.8% after the halving event. The cryptocurrency’s inflation rate will be lower than the average inflation target central banks reference worldwide at 2%. Unlike central banks, no one person or centralized entity can make adjustments to BTC’s monetary inflation rate.
Bitcoin’s Inflation Rate Slid from 50% in 2011 to 3.8% in Q1 2020
Back in 2009, after the Bitcoin network launched, Satoshi explained in various emails that bitcoins were meant to be scarce. On July 9, 2010, Satoshi wrote: “When someone tries to buy all the world’s supply of a scarce asset, the more they buy the higher the price goes.” Bitcoin’s inventor also created a limited number of bitcoins that will ever be produced and a systematical and mathematical reward reduction every 210,000 blocks. Crypto enthusiasts call the block subsidy reduction a “halving,” as the block rewards are always cut in half. Today the active supply of BTC is around 3.6-3.8% and this is because analysts assume there is far less than the 18.2 million circulating supply of BTC. We know this is true because a great number of users have lost coins, and older wallets created years ago haven’t spent their BTC in over five years. Moreover, studies conclude that close to 11 million BTC has not moved in over a year.