Bitcoin (BTC) revolutionized the financial world by offering a capped supply inflation of a digital asset for the first time in human history. Since then, thousands of cryptocurrencies surged with different supply inflation dynamics.
Notably, cryptocurrency prices depend on both its supply inflation and the market demand for the coin or token. A high demand for a limited supply makes the price go up against other currencies, while a higher supply increase than what is demanded will make the price fall.
Essentially, supply inflation is the rate at which new coins or tokens are added to cryptocurrencies’ circulating supply. This inflation rate is usually measured by dividing the amount of coins that will be added yearly by its current circulating supply.
A simple application of this theory is watching how much the price of a given cryptocurrency will be, within the same market capitalization, after a period of one year (or more). Interestingly, the expected price drops as inflation add
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