2 Okt

Inflation has cost Bitcoin hodlers 20% in the last decade

Since 2010, inflation turned USD 1 into 84 cents, while USD 1 invested in Bitcoin would be worth USD 274,000.

Bad news, the increase in the price of Bitcoin (BTC) over the last decade may have been exaggerated due to the accompanying fiduciary inflation. Since Bitcoin is typically denominated in U.S. dollars, it’s not immune to devaluation.

Why might the decline in Bitcoin futures volume signal the beginning of a new upward trend?

The price of Bitcoin against the inflation-adjusted price of Bitcoin.

In the decade following the economic crisis, the United States enjoyed one of the lowest inflation rates in history, hovering around 2% per year. However, during the decade, this added up to almost 20%. So if we use the 2010 dollar as a base and apply its subsequent devaluation to the Bitcoin price, then the current price of $10,466 becomes $8,770. While this may be a great lesson for some hodlers in the long run, it doesn’t mean that Bitcoin has been a bad investment or that it’s not a good store of value.

Investing in a business or in Bitcoin, which is better?

USD 1 invested in US dollars in 2010 against Bitcoin.

On the contrary, if we compare Bitcoin’s performance and the USD in the last decade (again adjusting for inflation), then there’s no comparison. A dollar invested in USD would have become 84 cents, while a dollar invested in Bitcoin would be worth USD 274,000. Cryptomoney has clearly done a better job of preserving its value.

Why isn’t a strong dollar good for Bitcoin?

Bitcoin inflation.

Bitcoin isn’t immune to inflation, but that could complicate the story a bit. As long as the rate of trust inflation remains low and Bitcoin continues to increase its value at a rapid pace as it has until not long ago, the effect of trust inflation can be negligible for most investors. The only way to escape completely would be to stop calling Bitcoin in fiat. Then, perhaps, 10 years from now, we’d be discussing how many Satoshis we hope to buy with one dollar.