M1 MacBook Air Battery Maximum Capacity Constantly Decreasing. HELP!

Batteries are considered Consumable Products. Over time it will degrade to a point where it needs to be replaced. In you case - the usage is normal as the capacity will go up and down all the time and never stay always at 100%. Apple Batteries are rated for 1000 Full Battery Cycles and / or 80% Capacity before needing Evaluation or replacement.

For additional reading on Battery and Apple Computers this link may help. About battery health management in Mac notebooks and especially for the M1 and Big Sur If battery charging is paused or on hold on your Mac

The freezing Diagnostics on the M1 Macs is a known issue. There is likely nothing at all wrong with your M1 Mac. See:

https://discussions.apple.com/thread/252738206

https://discussions.apple.com/thread/252813709

https://discussions.apple.com/thread/252814263

https://discussions.apple.com/thread/252742378

My personal experiences with the freezing Diagnostics issue is a few of those topics. Be sure to scroll down to the linked page and "Read all replies".

Another possible point to consider regarding Background processes - the processes are native macOS and do consume energy but these are all safe. If one what to explore more and check IF there is a process using unusually large amounts of CPU / Memory - Open the Activity Monitor in the Other Folder. Once open >> View >>View ALL processes. Look in the CPU Tab for High usage against the correspond name listed on left and do the same in the Memory Tab. If, there is something Odd or Unusual it could be a Run Away Process consuming CPU / Memory and translates to Battery discharging more quickly.

In closing - These things will really over tax the system and Zero Gain. Are there any AntiVirus, Disk Cleaner, Optimizers, Defrag, VPNs etc installed which should be removed as per Developers Instructions. They are useless, unneeded, cause havoc and interfere with the normal operation of the OS and may even Corrupt the OS requiring a Reinstallation. The Built-in Security of Big Sur is all that is required.

As stated in @P. Phillips first link:

Based on the measurements that it collects, battery health management may temporarily reduce your battery's maximum charge. This happens as needed to ensure that your battery charges to a level that's optimized for your usage—reducing wear on the battery, and slowing its chemical aging.

What I have found quite odd on my M1 MacBook Air, it seems

Battery Management reduces my max charge 1% after most

Big Sur updates.

Also, at least on my machine, it seems 11.4 update removed the numerical

values for battery capacity and only gives % life and cycle count. It used to

list both current battery capacity and original capacity and current charge

level. They seemed to have "dumbed" it down to just cycles and %.

When saying does not last more than 8 hours - Apple Says" Up to 15 hours wireless web and Up to 18 hours Apple TV app movie playback. The key words are Up To and that is under perfect conditions as per Apples Testing. I do know what Perfect Conditions are nor can I guess

Sorry this does not directly answer your concerns beyond No Tabs open - reduce brightness a little and remain in perfect Temperature when using the computer - not too hot and not too cold as both affect the battery

Just to add, it is not always just what you are actively doing

but energy usage can also be consumed by background

activities.

Also, some webpages can cause a lot of CPU

activity, i.e. power drain, when there are a few or many

"animated" items on the page which are generally advertisements

trying to catch your eye and entice you. Sometimes a single one

can consume a lot of energy.

It will drop and increase all the time. Batteries do not work in a straight line.

With the additional very good explanation from @ woodmeister50 - you have an even more compete view regarding the battery and how is functions.