I'd think this is OK but I'm not sure if another Option to just give feedback of keyboard activity would combine the best of both worlds.

A space with a cursor instead of an asterisk would make it harder to count the Chars

Adding a random 1 to 3 output chars instead of one would obfuscate this even more.

A delayed output could make you submit the password prompt before showing anything.

A single asterisk that switches back to space after 250ms inactivity may even be better.

I don't know, but somehow this feels underthought even if it probably is not. Simple is probably the best approach