Analysis
How Bitcoin Fights US Dollar’s 87% Purchasing Power Collapse
The dollar keeps losing purchasing power, while Bitcoin follows a different path. The reason could reshape how investors view money.
BLOCKINSIDERLoadingThe dollar keeps losing purchasing power, while Bitcoin follows a different path. The reason could reshape how investors view money.
Since 1971, the US dollar has quietly lost most of its purchasing power, and the slide has not stopped. In 2010, Bitcoin arrived with rules that the Federal Reserve cannot rewrite. Since then, the two have moved in sharply different directions, and few notice why.
The answer lies in how each one is created. That question is drawing fresh attention ahead of the next FOMC meeting. Here is what the numbers reveal.
Since 1971, the US dollar has lost about 87% of its purchasing power. In practical terms, goods that once cost $1 now cost nearly $7.70. Purchasing power measures how much a unit of money can buy. When prices rise faster than incomes or yields, each dollar buys less. Over decades, that gap becomes large.
The decline has not slowed down. Since 2010 alone, the dollar's purchasing power has fallen by 33.7%. That year is crucial in the history of finance. That’s when Bitcoin launched, offering a scarce digital alternative to money that governments can expand at will.
Bitcoin has moved in the opposite direction. Since its launch, its purchasing power has risen 687,770 times to its current value. That multiple reflects how little one coin was worth at the start. Early trades valued Bitcoin at fractions of a cent. Growth from such a low base looks extreme in hindsight.
Rising purchasing power also plays against the traditional notion of value.
Assets that appreciate are usually hoarded, not spent. Bitcoin works around this through divisibility. One coin splits into 100 million satoshis, so it can still serve as currency for small payments. Thus, value can climb without making everyday use impractical.
The gains also came with a caveat. Bitcoin suffered sharp drawdowns along the way. Investors who held through them were rewarded, but the path was rarely smooth.
The cause behind the dollar's falling purchasing power and Bitcoin's rising purchasing power is the same: Supply.
US M2 has climbed to $23.34 trillion with no cap in sight. Policymakers can add more whenever conditions demand it. Each new dollar dilutes those that are already in circulation. US M2 is up about 165% since 2010, with no cap in sight. Growth peaked at 21.2% in 2020 during the COVID stimulus surge.
Bitcoin follows the opposite path. Its supply is hard-capped at 21 million BTC, and about 19.93 million coins, or 94.9%, are already issued. No central bank, government, or miner can change that limit. The network enforces the rule through consensus.
After the 2024 halving, Bitcoin's issuance rate fell to roughly 0.35% annualized. That is now lower than US M2 growth, which sits near 5%. The entire supply is expected to be mined by 2140. By then, if the dollar survives, M2 is projected to hit $678 trillion to $6.08 quadrillion. That range assumes moderate tightening.
That divergence is what derives value. Over a century, a fixed supply and an expanding one lead to very different outcomes. One asset expands without limit, while the other stops at a fixed number. Scarcity alone does not guarantee demand. But a fixed supply meeting rising demand creates upward price pressure.
The near-term outlook looks bullish for crypto assets beyond Bitcoin. Institutions and banks are picking up stablecoins and digital assets to leverage the underlying technology. Stablecoins show how this shift is unfolding. Banks and payment firms use them to move value faster and at lower cost. Their growth also brings more users into the wider crypto ecosystem.
Bitcoin may benefit as the sector's most established asset. Newcomers entering through stablecoins could look to Bitcoin next. That adoption is likely to also push Bitcoin's price higher. BTC price is now consolidating beneath resistance at $86,663, with support sitting near $81,209. A confirmed move above resistance would open the path toward $100,000.
Macro conditions like an interest rate shift or the lack thereof may add support as CME FedWatch shows a 23.8% chance of a US rate increase before the next FOMC meeting, two weeks away.
Low odds of tightening usually ease pressure on risk assets. That backdrop could give Bitcoin room to extend its recovery.
The dollar's 87% loss is a story about unlimited supply. Bitcoin's 687,770x gain is a story about limited supply.
For long-term holders, the argument is simple. A currency with a fixed supply offers protection from dilution that the dollar cannot. As institutions move in and rate-hike odds stay low, that contrast is becoming harder for markets to ignore.
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