Bitcoin compound inflation of 7% since 2020 canceled out by 900% gains while USD declines 20%

While Bitcoin is often considered a hedge against inflation, it does have a positive inflation rate of 0.83%. Bitcoin’s inflation is extremely low compared to the dollar’s peak of 9.1% in 2022. However, when we compare the cumulative inflation rate for both Bitcoin and the US dollar, we see the true strength of Bitcoin’s role in preserving wealth.

From 2020 to 2025, Bitcoin rose roughly 960%, whereas the US Dollar Index (DXY), which measures the US dollar against a basket of other currencies, rose just 12% in nominal terms.

Bitcoin’s inflation-adjusted price and the DXY, normalized for inflation , provide critical insights into the real value dynamics of both assets. While the nominal DXY reflects relative currency strength, its inflation-adjusted value highlights the ongoing erosion of purchasing power.

The nominal DXY currently stands at 109.8, reflecting global demand for the dollar amid macroeconomic uncertainty. However, when adjusted for cumulative US inflation since 2020—averaging over 2% annually and peaking above 8% in 2022—the real value of the DXY drops to 87.5. This represents a 22.3-point difference, or roughly 20.3% of the nominal value, illustrating the dollar’s substantial loss of purchasing power over time despite its relative strength against other currencies.

DXY adjusted for inflation (Source: TradingView)

Bitcoin’s nominal price, meanwhile, is around $91,000. Adjusted for its low supply inflation—1.74% annually from 2020–2024 and 0.83% in 2025—its inflation-adjusted price stands at approximately $84,365. The $6,635 difference represents only 7.3% of its nominal value, stressing Bitcoin’s relative stability and ability to preserve purchasing power over time compared to fiat currencies. This smaller adjustment highlights Bitcoin’s programmed scarcity and low inflation as key factors in its resilience.

BTC adjusted for inflation (Source: TradingView)

The divergence between the inflation-adjusted metrics for the DXY and Bitcoin emphasizes a broader narrative. While fiat currencies like the dollar face significant devaluation due to inflation, Bitcoin’s controlled supply forces position it as a hedge against currency debasement. The more pronounced inflationary impact on the DXY emphasizes the challenge of maintaining purchasing power in a fiat system, particularly during periods of high inflation.

The difference between nominal and inflation-adjusted metrics is vital for evaluating the long-term value of assets. The DXY’s nominal strength masks the fundamental erosion of the dollar’s purchasing power, while Bitcoin’s inflation-adjusted price reflects its ability to maintain value over time. These insights reinforce the importance of inflation-adjusted analyses in developing effective strategies for navigating the macroeconomic landscape.

Further, the inflation of comparison currencies used to establish the DXY should also be considered to identify the precise divergence. However, the above figures give a ballpark assessment of Bitcoin’s elevated strength against the dollar beyond nominal terms.

Simply put, if you invested $100 in Bitcoin in 2020 and $100 in DXY today, your BTC would have a buying power of $927, while your DXY would be equivalent to $91 in real terms.