Bitcoin is often thought of as a hedge against inflation, but the actual inflation rate is 0.83%. Bitcoin’s inflation rate is extremely low compared to the dollar’s peak of 9.1% in 2022. However, comparing the cumulative inflation rates of Bitcoin and the US dollar reveals the true strength of Bitcoin’s role in preserving wealth.
From 2020 to 2025, Bitcoin rose about 960%, while the US Dollar Index (DXY), which measures the US dollar against a basket of other currencies, rose only 12% in nominal terms.
Bitcoin’s inflation-adjusted price and DXY normalized to inflation provide important insight into the real value dynamics of both assets. While nominal DXY reflects relative currency strength, its inflation-adjusted value highlights the ongoing decline in purchasing power.
Nominal DXY is currently at 109.8, reflecting global dollar demand amid macroeconomic uncertainty. However, when adjusting for the cumulative U.S. inflation rate since 2020 (averaged over 2% per year, peaking at over 8% in 2022), the real value of DXY drops to 87.5. This corresponds to a difference of 22.3 points, or about 20.3% of nominal value, and shows that despite the dollar’s relative strength against other currencies, it has lost significant purchasing power over time. are.
Meanwhile, Bitcoin’s official price is around $91,000. Adjusting for low supply inflation (1.74% annually from 2020 to 2024 and 0.83% in 2025), the inflation-adjusted price is approximately $84,365. The difference of $6,635 is only 7.3% of its nominal value, highlighting Bitcoin’s relative stability and ability to maintain purchasing power over time compared to fiat currencies. This small correction highlights that Bitcoin’s programmed scarcity and low inflation are key factors in its resilience.
The divergence between DXY and Bitcoin’s inflation-adjusted metrics highlights a broader story. While fiat currencies like the dollar face significant value declines due to inflation, Bitcoin’s controlled supply positions it as a hedge against currency declines. The more pronounced inflationary impact on DXY highlights the challenge of maintaining purchasing power in fiat currency regimes, especially during periods of high inflation.
The difference between nominal and inflation-adjusted metrics is critical in assessing the long-term value of an asset. While DXY’s nominal strength masks a fundamental erosion in the dollar’s purchasing power, Bitcoin’s inflation-adjusted price reflects its ability to maintain value over time. These insights support the importance of inflation-adjusted analysis in developing effective strategies to navigate macroeconomic conditions.
Additionally, inflation in the comparison currency used to establish the DXY must also be considered to determine the exact divergence. However, the numbers above give a rough assessment of Bitcoin’s strength against the dollar beyond nominal terms.
Simply put, if you invested $100 in Bitcoin in 2020 and $100 in DXY today, your BTC purchasing power would be $927, and DXY would be worth $91 in real terms.
