Bitcoin's inflation rate outperforms Fed's target

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Written by

William Miller
Published on

December 2, 2022


Key points: 

  • Bitcoin’s inflation rate is currently at 1.7%, well below the Federal Reserve’s 2% monetary inflation target.
  • The Fed will reconsider its 2% inflation target given the cost-effectiveness of raising interest rates and 4% monetary inflation.
  • Satoshi Nakamoto create BTC's monetary inflation rate to be a fixed rate determined by the increasing circulation of coins, up to a cap of 21 million.
  • Unlike national currencies with adjustable inflation rates, such as the U.S. dollar, Bitcoin’s inflation rate is predictable and cannot be controlled by a central authority.

Bitcoin’s inflation rate has fallen from 50% in 2011 before the halving to 4% in 2020 and is currently at 1.7%, well below the Federal Reserve’s 2% monetary inflation target.

Inflation Btc

While the rate point to rapid and mainstream adoption of Bitcoin, the fundamentals of the digital currency is unaffected by negative GDP growth in 2022, which has already increased pressure on the Federal Reserve to revise its 2% inflation target.

The Fed will reconsider its 2% inflation target given the cost-effectiveness of raising interest rates and 4% monetary inflation.

Some experts believe that the benefits of raising interest rates will lead to higher average nominal interest rates, leaving enough room for monetary policy implementation and possibly eliminating the risk of the zero lower bound.

Nick Tweet

While Bitcoin is vulnerable to macro announcements and inflation data, blockchain proponents believe the technology can help reduce inflation and resolve the world's monetary woes, as evidenced by Bitcoin's solid fundamentals following macro data failures. Satoshi Nakamoto create BTC's monetary inflation rate to be a fixed rate determined by the increasing circulation of coins, up to a cap of 21 million.

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Bitcoin's unique deflationary properties control supply and price. However, Bitcoin has faced a backlash from parts of the fintech community who believe its high volatility will negatively impact its users.

Despite criticism, volatility has played a large role in the success of Bitcoin and other altcoins. Interestingly, analysts believe that a certain level of stability is needed for Bitcoin to maintain its status as the world's best-performing currency.

Unlike national currencies with adjustable inflation rates, such as the U.S. dollar, Bitcoin’s inflation rate is predictable and cannot be controlled by a central authority.


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