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Despite Bitcoin reaching record nominal highs, a new analysis from Galaxy Research suggests the cryptocurrency has yet to truly surpass the $100,000 mark when adjusted for inflation. This perspective highlights the significant erosion of the US dollar's purchasing power since 2020, altering the real value of Bitcoin's past peaks.
Key Takeaways
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Bitcoin has not broken $100,000 when adjusted for inflation, according to Galaxy Research.
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The US dollar has lost approximately 20% of its purchasing power since 2020.
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Persistent inflation and dollar weakness continue to fuel the "debasement trade" narrative.
Inflation Adjusts Bitcoin's Real Value
Galaxy Research's head of research, Alex Thorn, stated that when Bitcoin's price is adjusted for inflation using 2020 dollars, the cryptocurrency's all-time high in October, which exceeded $126,000, actually peaked at $99,848 in real terms. This calculation utilizes the US Consumer Price Index (CPI) to track inflation and account for the gradual decrease in purchasing power over time.
The Weakening Dollar and Market Narratives
Data from the US Bureau of Labor Statistics indicates that CPI has risen, continuing a trend that has significantly diminished the dollar's buying power. Since 2020, the US dollar has lost about 20% of its value, meaning that prices are now roughly 25% higher than they were four years ago. Consequently, a dollar today buys only about 80% of what it could in 2020. This inflationary environment, coupled with a weakening US dollar, has bolstered the "debasement trade" – a strategy where investors seek assets that can preserve value as fiat currencies lose their purchasing power.
Bitcoin's Sensitivity to Monetary Policy
Market analysts note that Bitcoin's recent price movements are closely tied to expectations surrounding monetary policy rather than just headline economic data. While US inflation has cooled from its mid-2022 peak, it remains above the Federal Reserve's target. This slow and uneven disinflation process prompts the Fed to maintain a cautious stance, limiting the possibility of an aggressive easing cycle. This sensitivity underscores Bitcoin's ongoing connection to Federal Reserve policy decisions.
Sources
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Bitcoin’s $100K Milestone Still Unreached When Inflation Is Considered: Galaxy Research, Yahoo Finance.
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