Bitcoin (BTC) briefly surpassed the $126,000 mark in October; however, Alex Thorn, the global head of research at Galaxy Digital, argues that when inflation is taken into account, its actual value never reached six figures.
Thorn explained on X that adjusting Bitcoin’s price for inflation using 2020 dollars reveals it never truly exceeded $100,000. In fact, its peak was approximately $99,848 in terms of 2020 purchasing power.
This distinction highlights the difference between nominal and real prices. The nominal price shows Bitcoin’s cost at face value during a specific year without adjustments. Conversely, the real price factors in inflation to provide a clearer picture of its true buying power relative to a fixed point in time—here chosen as 2020.
The choice of early 2020 as a baseline corresponds with just before the Federal Reserve’s significant monetary expansion triggered by the Covid-19 pandemic.
Insights to consider
This analysis offers perspectives for both optimistic and skeptical investors. Supporters might argue that Bitcoin’s rise from its lows in 2022 isn’t as extreme as previously believed when viewed through an inflation-adjusted lens. This could imply less speculative excess at October’s nominal high and suggest further potential for upward momentum.
Critics may counter that Bitcoin’s underwhelming performance after adjusting for inflation indicates it fails to fulfill promises as an effective hedge against currency devaluation caused by money printing. They might recommend sticking with gold instead—even though gold itself has faced challenges keeping pace with inflation over recent decades despite recent gains.