News — the increase in the Bitcoin (BTC) price over the past decade may have been overstated because of the accompanying fiat inflation. Since Bitcoin is typically denominated in fiat — United States dollars usually — it is not immune to its depreciation.
In the decade that followed the economic crisis, the U.S. enjoyed some of the lowest inflation in history, which hovered around 2% annually. However, over the decade, this added up to almost 20%. Thus, if we use the 2010 dollar as our base and apply its subsequent depreciation to the price of Bitcoin, then the current price of $10,466 turns into $8,770. Though this may be a sobering realization for some long-time hodlers, it does not mean that Bitcoin was a bad investment or that it is not a good store of value.
On the contrary, if we compare the performance of Bitcoin and USD in the last decade (again adjusted for inflation), then there is no comparison. One dollar invested in USD would have turned into 84 cents, while one dollar invested in Bitcoin would be worth $274,000. Cryptocurrency has clearly done a much better job of value preservation.
Bitcoin is not immune to inflation either, but that might over complicate the story somewhat. As long as the fiat inflation rate stays low and Bitcoin continues to appreciate at a rapid pace that it has done until recently, the effect of fiat inflation may be negligible for most investors. The only way to escape it completely would be to stop denominating Bitcoin in fiat. Then, perhaps, 10 years from now, we would be discussing how many Satoshis one might hope to buy with a dollar.
[image:pixabay]
