Contrary to the pop-culture definition, inflation isn’t purely driven by fiscal policy or money supply. Supply and demand (aka cost-push inflation and demand-pull inflation) are the main drivers. Fiscal policy modulates these factors, but inflation existed long before fiscal intervention.

Bitcoin adoption is a deflationary process because an increasing number of people are competing over a fixed (ultimately) supply of Bitcoin.

If more people want Bitcoin, the price goes up. Why do more people want Bitcoin? Because the price goes up. The cycle reverses when the price starts going down.