The Dollar Is Inflating Against Bitcoin

On Jun 12, 2022

It is my fervent wish that hyperinflation never reaches our shores. The probability that we will avoid that outcome is extremely slim. Put another way, our chances of experiencing hyperinflation are extremely high; the only question is timing. When will it happen? Many hope it’s a long way off. Some believe it’s here already and has been for quite some time.

The U.S. Dollar Is Drastically Inflating Against Real Estate

Some argue that hyperinflation is already here in real estate. Many Americans (and other people around the globe) are feverishly overpaying for real estate that, in some areas, is causing housing prices to nearly double in just one year. I don’t mean to be a buzzkill, but no, the value of your home didn’t just double in a year. Your currency is rapidly inflating against a hard asset like real estate. Are there other signs?

Is Bitcoin An Inflation Hedge?

There are plenty of people saying bitcoin isn’t an inflation hedge. They point to last year of record amounts of inflation while the bitcoin price has remained about the same or has moved lower since November. How can that be?! Well, the only people who try to measure inflation month-by-month or a year at a time are central bankers and people who operate with high time preference. Is that you? If so, zoom out!

Let’s make a fair comparison of the U.S. dollar and bitcoin since the day they reached parity. Most people including Bitcoiners have no idea when that happened. Do you? A quick search reveals that on February 9, 2011, one bitcoin was equal to one dollar. Now we have a measuring stick for inflation for the past 11 years. Measuring inflation by the decade strikes me as a low time preference way of thinking. So, what do we learn?

The Dollar Has Drastically Inflated Against Bitcoin

If you zoom out as I suggest, you will notice that bitcoin is now 29,000 times more valuable than the U.S. dollar. Viewed through that lens, I think it’s safe to say bitcoin is telling us a different story about inflation. It’s telling us that the U.S. dollar is drastically inflating against the hardest form of money ever invented or discovered. Anyone who tries to argue otherwise doesn’t understand money, the banking system or our financial system. Oh wait, that’s pretty much all of us.

I take no comfort in pointing this out, but I roll my eyes at the morons in government, the press, Wall Street, Silicon Valley and yes, even die-hard Bitcoiners who view inflation through the wrong lens. If your unit of account is the U.S. dollar and you view bitcoin as an investment then your framing is plausible, if misguided. Maybe I’m the one who is delusional, but I think the experiment of a decentralized form of money that governments, corporations and billionaires can’t devalue has been working very nicely since 2009, and I’m sure more people will discover the blinding flash of the obvious this year, and for many years to come.

To all those Bitcoiners who believe they operate with low time preference and wonder why bitcoin hasn’t moved in lockstep with reported inflation numbers, check your financial blind spot: You’re using the wrong unit of account. You suffer from fiat disease. If your unit of account is bitcoin, the U.S. dollar has been rapidly inflating against bitcoin for 11 years. No, it hasn’t been a smooth ride.

No need to panic but newsflash: The U.S. dollar has been drastically inflating against bitcoin for quite some time now. I admit this reality is a tough pill to swallow. You might want to get some just in case the dollar keeps inflating.

Bitcoin Is Savings Technology Not An Investment

There is a reason why many companies and people keep accumulating more bitcoin while the price goes lower. Even the framing of bitcoin as being in a bull or bear market is completely off the mark because it implies bitcoin is an investment. There are plenty of people who believe bitcoin is an investment. I’m not one of them. However, if you view bitcoin as savings technology, then the current season is a value-discovery period for the only digital money that has existed for at least a decade and has gained 29,000 times more value than the world’s reserve currency. You might want to get some just in case.

“Humanity and our world has many problems … bitcoin isn’t one of them.” –Erin Crawford

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