All throughout 2020 the narrative driving Bitcoin price appreciation was that it would be the best hedge against inflation. Two years later, inflation running hot has destroyed financial markets, and it brought the ROI of BTC when adjusted for inflation to a mere zero percent.
Bitcoin ROI Adjusted For Inflation Hits Zero
The 2020 bull market in Bitcoin and other cryptocurrencies really began to take off when billionaire trader and philanthropist Paul Tudor Jones likened Bitcoin to gold in the 1970s – the last time inflation pushed well past the 2% Fed target level.
Jones claimed that BTC, due to its scarce 21 million coin supply, would be the “fastest horse in the race against inflation.” More than two years following the quote, Bitcoin is trading at a level that when adjusted for inflation, makes the ROI 0% since the beginning of the 2018 bear market.
Real Bitcoin price adjusted for US CPI since January 2018 | Source: Timothy Peterson, CFA, CAIA
In a new chart shared by Chartered Financial Analyst and Chartered Alternative Investment Analyst Timothy Peterson of Cane Island Alternative Advisors, the price per BTC when adjusted for United States CPI data, results in no returns whatsoever after holding the top cryptocurrency for more than four years – going on five.
As for why Bitcoin has failed so miserably as an inflation hedge, it remains a high-beta asset and was the first to be dumped when risk returned to macro and the money supply decreased. Gold, the standard in inflation hedges has also failed to perform during the strongest inflation in more than 40 years.
When Will The Crypto Market Bottom?
Peterson also has a custom model for picking Bitcoin bottoms, which points to a floor at roughly $12,000. But the crypto market will need to stay in that range for roughly 200 days before the 200-day moving average triggers a buy signal when it crosses through mining difficulty value.
The hash ribbons, another technical and on-chain hybrid indicator that also rely on Bitcoin difficulty for its data, for the first time ever failed to produce any meaningful upside between its last buy signal and the most recent capitulation phase.
The previous hash ribbon buy signal failed to produce ROI | Source: BTCUSD on TradingView.com
Prior to this anomaly, the hash ribbons were considered the cryptocurrency’s most profitable buy signal ever. Bitcoin hash rate continues to dive as miners capitulate and sell coins at a loss. While the event is largely negative for near-term price action, ultimately it could purge the network of weak miners and make way for the next bull market.
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Featured image from iStockPhoto, Charts from TradingView.com