Inflation rate in cryptocurrency measures how fast the circulating supply increases over time due to token unlocks, staking rewards, and other emission mechanisms. It is expressed as a percentage of the current circulating supply.
A high inflation rate means the circulating supply is growing rapidly, which can dilute existing holders' share of the network. Even if the overall market cap grows, individual token value may decline if supply grows faster than demand.
Some level of inflation is often necessary to fund staking rewards and incentivize network security. The key is whether the inflation rate is sustainable and whether it decreases over time through mechanisms like halving or programmatic supply reductions.