Bitcoin Inflation has become a hot topic as new analyses reveal surprising insights into the cryptocurrency’s true value. According to Alex Thorn, Head of Research at Galaxy, when adjusted for inflation, Bitcoin has never actually crossed the $100,000 mark, despite reaching an all-time high of over $126,000 in October. This revelation offers a different perspective on Bitcoin’s historical price performance.
Understanding Inflation’s Impact on Bitcoin
The concept of Bitcoin Inflation adjustments comes from comparing Bitcoin’s price to the Consumer Price Index (CPI). The CPI measures inflation through the price of a basket of goods and services, offering a clear picture of changes in purchasing power over time. Thorn specifies that if we take inflation into account, the peak value of Bitcoin in 2020 terms was just $99,848. This adjustment reflects the 20% decrease in the dollar’s purchasing power since 2020.
Key Insights from Alex Thorn
Alex Thorn’s findings suggest that while Bitcoin’s nominal value might seem to show a significant increase, its real value when adjusted for inflation tells a different story. The Bitcoin Inflation analysis emphasizes the importance of considering economic factors such as CPI when evaluating cryptocurrency trends.
According to the latest reports, CPI has risen by 2.7% over the past year, highlighting a persistent inflationary environment in the US. Since 2020, the cost of goods has increased by approximately 1.25 times, meaning today’s dollar is only worth about 80% of what it could buy back then.
US Inflation and Its Effects
The US inflation rate soared above 9% during the COVID-19 pandemic in mid-2022, significantly surpassing the Federal Reserve’s target of 2%. This persistent inflation has affected various economic sectors, including the cryptocurrency market.
The Dollar Index and the Debasement Trade
The Dollar Currency Index (DXY), which tracks the US dollar against a basket of international currencies, has also shown a downward trend. Since the beginning of the year, the DXY has dropped by 11% to 97.8, hinting at a decline in the dollar’s global standing. This decrease has fueled the “debasement trade,” where investors seek assets like Bitcoin that might retain or increase value as fiat currency loses its purchasing power.
In summary, understanding the nuances of Bitcoin Inflation adjustments provides critical insights into the cryptocurrency’s real-world value. It emphasizes the importance of considering economic indicators like CPI when assessing Bitcoin’s market performance.
