To be such, the new all-time high must exceed the previous adjusted for the inflation of the last two and a half years in the USA.
Today, the price of bitcoin reached a new all-time high of 69,324.58 USD (Coinbase data), surpassing the previous record of 68,789.63 USD set in November 2021.
But is it really a new all-time high?
It’s been almost two and a half years since November 2021, and during this period, inflation rates in many countries have been above average. For example, in the last twenty years, so-called “first world” countries had never seen such inflation figures.
Over the past two years, the US has been far from the Federal Reserve’s 2% inflation target.
Taking into account the inflation of the last two and a half years, the old ATH of Bitcoin should be adjusted for inflation and would therefore be higher.
Bitcoin’s previous all-time high was reached on November 14, 2021, with a price of 68,789.63 USD.
To calculate the price of a good adjusted for inflation, the Consumer Price Index (CPI) is used. The first step is to find the CPI for the year in which the price of the good is known and for the year in which you want to calculate the adjusted price. The CPI is a statistical indicator that measures the average change in prices of a basket of goods and services commonly purchased by households.
Consumer Price Index (CPI) for the United States over the last three years:
CPI 2021: 270.97
CPI 2022: 292.62
CPI 2023: 304.70
CPI January 2024: 309,685
(Data taken from https://fred.stlouisfed.org/series/CPIAUCSL)
Calculate the inflation rate between the two years by dividing the difference between the CPI indices for the base year’s CPI index and multiplying by 100. The formula is as follows: Inflation rate = ((CPI Year 2 – CPI Year 1) / CPI Year 1) * 100.
To adjust the ATH price using the calculated inflation rate, the formula is as follows: Adjusted price = Original price * (1 + Inflation rate / 100)
Inflation rate 2022: ((292,62 – 270,97) / 270,97) * 100 = 7,989814371%
ATH adjusted to the 2022 inflation rate: 68,789.63 * (292.62 / 270.97) = 74,285.79 USD
Inflation rate 2023: ((304,70 – 270,97) / 270,97) * 100 = 12,447872458%
ATH adjusted to the 2023 inflation rate: 68,789.63 * (304.70 / 270.97) = 77,352.48 USD
Inflation rate January 2024: ((309,685 – 270,97) / 270,97) * 100 = 14,287559508%
ATH adjusted to the January 2024 inflation rate: 68.789,63 * (1 + 14,287559508 / 100) = 78617,99 USD
Therefore, assessing the inflation rate, the true all-time high in terms of Bitcoin’s purchasing power in dollars is $78,617.99 USD.