How does Bitcoin’s supply cap affect inflation?

Bitcoin’s supply cap of 21 million coins directly affects its inflation by creating a fixed supply that cannot be increased.

Unlike fiat currencies, which can be printed by governments, Bitcoin’s capped supply ensures that no additional coins will be created beyond this limit. This scarcity helps prevent inflation, as the value of Bitcoin is not eroded by an increasing supply.

Over time, as demand for Bitcoin grows and its supply remains limited, this can lead to deflationary pressure, potentially increasing the value of each Bitcoin relative to traditional currencies.