Ask CryptoVantage: What Are the Lowest Inflation Coins?

Do Cryptocurrencies Have Inflation?

Indeed, inflation affects cryptocurrencies, including Bitcoin, which is sometimes referred to as “inflation resistant.” When it comes to inflation, Bitcoin works much like gold. However, since mining for new Bitcoin is automatically cut in half every four years, inflation rates inevitably fall.

Inflation also exists in all other coins, though some have a set maximum supply, like Bitcoin, which is hard capped at 21 million. That’s an important distinction to something like the US dollar, which has no hard cap on supply and can be printed ad nauseam.

Cryptocurrency inflation rates are also predictable and controllable, distinguishing them from fiat money.

Does Inflation Have Any Benefits?

Of course, inflation is not all dark. In fact, a moderate level of inflation can drive coin spending, help grow the economy, and prevent people from holding on to their coins for too long. However, moderate is the key word here.

Annual issuance also keeps the inflation rate at bay, meaning that coins with lower annual issuance usually have lower inflation rates. Of course, it’s important not to confuse issuance with total supply. Issuance is generating new coins or tokens through various processes, including mining. But, total supply is all the “issued” coins, minus the ones burned.

With fiat currencies, central banks decide how much cash to provide based on their highest demand estimate. In the case of cryptos, all currency holders have a vote. As a result, a currency’s community may determine whether to increase or reduce the supply level, and all holders can vote on it based on their specific share.

Lowest Inflation Coins

As mentioned earlier, all cryptocurrencies experience inflation. For some, the inflation rate can be less than 1%, while for others, it can exceed 10%. Bitcoin, Ethereum, and Cardano are among the lowest inflation coins out there.

It should be noted that inflation is a hotly debated topic in crypto and people use a wide variety of metrics to support their coin of choice as a deflationary asset. What follows is a rough estimate of some of the publicly available inflation numbers of popular coins.

Bitcoin

Technically speaking, bitcoin is an inflationary coin. This is so because it was created to resemble the steady inflation rate of gold. The traditional definition of deflation implies that Bitcoin is deflationary. However, since its buying power grows over time, deflation really refers to a reduction in the amount of coin supply.

An inflation-proof coin is one that is completely protected against outside influences. That’s why it’s better to call Bitcoin “inflation-resistant”. Bitcoin is more of a “inflation-resistant” asset than “inflation-proof,” which implies total protection against external influences.

Since it is the biggest and most well-known coin, Bitcoin is typically seen as a reliable inflation hedge. It may even be thought of as a superior hedge than gold. Bitcoin has always been one of the low-inflation cryptocurrencies around, with the current rate standing at 1.76%.

Ethereum

The second-most used coin globally is Ethereum. With a 0.54% inflation rate, it boasts one of the lowest inflations among all cryptocurrencies. There is no maximum supply, which initially seems unsettling. However, it’s crucial to note that it has a fixed supply of 18 million coins, which are mined annually.

This implies that as the amount of money in circulation increases, its inflation rate will continue to gradually decline. It’s important to note that Ethereum has a thriving community and that a major shift coming soon may cause the inflation rate to fall even lower.

Cardano

Cardano is a coin that aims to give underdeveloped nations access to the benefits of blockchain technology. The maximum supply for Cardano is capped at 45 billion and 71% of that has already been released. Cardano’s current inflation is around 1.95%.

Some High-Inflation Coins

Now that we’ve mentioned some low-inflation currencies, it’s not a bad idea to explore two high-inflation coins too.

Dogecoin

Since Elon Musk frequently expressed his support for the coin in public, Dogecoin has attracted a lot of attention. It was initially ridiculed as a joke, but it has since become one of the most popular cryptocurrencies. Although Dogecoin technically has no hard cap, its annual supply is set at 5.256 billion coins. As a result, Dogecoin’s inflation rate will continue to drop over time.

While Dogecoin is nowhere near cryptos like Ethereum, with a 3.86% inflation rate, it is still pretty low compared to Polkadot.

Cosmos

Cosmos is just another cryptocurrency competing with Ethereum and other renowned cryptos. Cosmo’s inflation rate is currently at 5.83%. The number of coins stacked, or placed, in its ecosystem will determine the actual rate. To encourage coin holders to hold onto their cryptocurrencies, Cosmos seeks to decrease the inflation rate as more units are staked.

AVAX

Avalanche’s native token, AVAX, is created to guide transactions throughout its ecosystem. AVAX is used to support network transactions by charging fees, distributing rewards, and facilitating governance. At 24.88%, it is surely a high-inflation coin in the crypto market.

Bottom Line

So, there you have it. These are some of the lowest inflation cryptocurrencies on the market that will probably lower their rates even further. Low annual issuance, growing buying power, and the coin holders’ power over the future inflation rate makes cryptocurrency inflation very different from that of a fiat currency.

For this reason, investing in the cryptocurrency market can be very lucrative, both now and in the future. All you need is a team of experts who can guide you in the right direction and that’s exactly what we do at CryptoVantage.