## The Erosion of US Dollar Purchasing Power: Bitcoin's Real Gains Far Below Nominal Price

**A Heartbreaking Discovery**

Bitcoin surged to $126,000 in October 2025, seemingly setting a new all-time high. But the latest analysis by Galaxy Research's Alex Thorn exposes this bubble—**when measured in 2020 dollars, Bitcoin has not even surpassed the $100,000 mark**.

To understand Thorn's point more deeply: the nominal high of $126,000, after inflation adjustment, is actually only equivalent to $99,848 in 2020 dollars. How big is the gap? It clearly illustrates the distortion inflation causes in asset pricing.

### Inflation is silently eroding wealth

According to data from the U.S. Bureau of Labor Statistics, since 2020, inflation has eroded the purchasing power of the dollar by 20%. What does this mean? **One dollar now can only buy 80% of the goods it could in 2020**.

Specifically, the CPI indicators show:
- November's unadjusted year-over-year increase reached 2.7%
- Peaked above 9% in mid-2022 (post-pandemic high)
- Commodity prices have risen 25% compared to 2020
- The Federal Reserve's target is 2%, but actual figures continue to exceed this

This persistent currency devaluation implies that any asset priced in nominal dollars may be subject to a "phantom inflation" effect.

### Behind the decline of the US Dollar Index: capital flows

The US Dollar Index (DXY) performed weakly in 2025:
- Fell 11% throughout the year
- Dropped to 97.8
- Reached a three-year low of 96.3 in September

Since October 2022, the dollar has continued to weaken against major global currencies. This signals that investors are engaging in "currency depreciation trades"—massive capital flows into assets like Bitcoin, viewed as inflation hedges.

### Market divergence

Interestingly, there is a subtle divergence in the market regarding Bitcoin's current price:

**Institutional performance is inconsistent**
- Net outflows from exchange-traded products
- Corporate treasuries actively accumulating
- Long-term holders remain steadfast

**Technical signals indicate weakness**
- On-chain activity has cooled
- Miner participation has declined
- But these are often contrarian indicators before price stabilization

VanEck's perspective is noteworthy: they see Bitcoin's current price adjustment as a "healthy market reset," not a final decline. As speculative leverage is cleared, structural liquidity is improving.

### What Thorn's findings imply

Thorn's analysis is profound—**in an environment where inflation continues to erode value, nominal gains often mask the true change in real value**. Bitcoin's performance in terms of actual purchasing power has fallen far short of market expectations.

As traditional finance battles ongoing inflation, this discussion sparks deeper reflection on whether cryptocurrencies can truly serve as hedging tools. Ultimately, the value of digital assets must be measured against real purchasing power.

*Currently, Bitcoin is around $92.97K, leaving significant room for correction from its peak of $126,000.*