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Bitcoin’s inflation rate has fallen precipitously over the year to beat that of the United States Dollar by at least three times over. With over 90% of the total supply issued via its hardcoded monetary policy, Bitcoin is increasingly setup as a long-term hedge against economic uncertainty, and fiat currency debasement.

Bitcoin’s falling inflation rate originates from the crypto’s fixed 21 million supply. Every four years, the issuance of coins drops after the halving event. Consequently, the maiden cryptocurrency’s inflation rate has been on a predictable decline since its inception in 2009, and now stands at 1.79% as of March 4, per data from WooBull charts.

Bitcoin inflation rate chart. Source: Woobull

Meanwhile, the yearly inflation rate of the US Dollar in 2023 stands at 6.4%. Official USD inflation peaked at 7% in 2021, per data by USInflationCalculator. This implies that the USD inflation is 3.57 times higher than Bitcoin.

US dollar annual inflation rate. Source: USInflationCalculator

Bitcoin’s dropping inflation rate

Bitcoin has a comparatively low inflation rate because of the asset’s built-in deflationary model. The intrinsic design means that inflation decreases after halving events, which approximately occur every four years. The rate is determined by the miner reward system, which is cut in half after each event. Specifically, the number of Bitcoin rewards for miners are halved, which means the number of BTC produced (or discovered) by miners is also halved.

The next event is expected to take place in May 2024. For Litecoin, which has 84 million hard-capped coins, this event will take place in August 2023.

By comparison, the US Dollar’s inflation rate will probably rise as the currency’s value continues to decline over time. The drop in value is first and foremost due to excessive money printing, coupled with the diminishing purchasing power of each dollar. Inflation is caused by several factors, including an uptick in the money supply, a slowdown in demand, or a decrease in production. Popular references to ‘supply chain’ issues are often misplaced, and potentially intentional misdirection attempts from the primary sources of currency debasement – central bank fiat-currency issuers.

All in all, Bitcoin’s inflation rate remains lower because it is decentralised, and there isn’t any realistically achievable mechanism that would change its monetary policy. As such, the maiden crypto can practically circumvent most economic risks linked with the United States Dollar, or any other fiat currency on a long term time horizon.

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