Bitcoin recently entered a bull market. Excitement is now pervasive in the Bitcoin ecosystem and many people celebrated bitcoin reaching a new all-time high on March 5, 2024 when the price of bitcoin surged to $69,210. The previous all-time high was set on November 10, 2020 when the price reached $68,982. While many celebrated March 5, 2024 as a date a new all-time high was reached, which is unquestionably true based on the unadjusted numbers, perhaps a better metric would be viewing bitcoin’s price factoring in inflation. Since bitcoin’s last all-time high on November 10, 2020, the United States has been plagued by stubborn, high inflation.
The chart below, using data provided by the U.S. Bureau of Labor Statistics, shows the monthly rate of inflation for each year since the first Bitcoin block was mined in January 2009. A quick glance at the chart and it is easy to see that the highest months of inflation have almost exclusively occurred since the November 10, 2020 all-time high, including a 28 month stretch that had inflation of higher than 4 percent. Stated differently the US inflation rate was at least twice as much as the Feds’ target inflation rate of two percent and in some months it was in excess of four times the Fed’s target rate.
As a result of the persistent high inflation, adjusting the all-time high to reflect the staggering inflation numbers is necessary to provide an apt comparison. This calculation is easy to make using the data from the chart above. As previously discussed, prior to March 5, 2024, the previous all-time high was reached on November 10, 2020. To calculate the all-time high adjusted for inflation one would take the monthly inflation figure from the chart above, divide by 12 (because each month represents 1/12 of the year), add 1, and then multiply by the previous all-time high.
For example, if we were trying to determine bitcoin’s all-time high adjusted for inflation as of December 1, 2020, the calculation would be:
Adjusted all-time high on December 1, 2020 = $68,982.20 * 1 + (0.012 * (1/12))
Adjusted all-time high on December 1, 2020 = $69,061.18
The following chart shows how the bitcoin all-time high adjusted for inflation has grown since November 10, 2020.
As of February 1, 2024 the bitcoin all-time high adjusted for inflation was roughly $82,000 (compared to an unadjusted all-time high of $69,210). This figure is a fairer assessment of how bitcoin is gaining value compared to the US dollar. The next set of inflation numbers for February 2024 are schedule to be released on March 12, 2024. When the inflation numbers are released next week the inflation adjusted all-time high will rise. The pertinent question becomes when will the surging bitcoin price chase down and achieve a new inflation adjusted all-time high?
