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The purchasing power of Bitcoin

BITSTAMP:BTCUSD   Bitcoin / U.S. Dollar
The price of BTCUSD keeps rising up, but so does the supply of broad money ( M2 ). So far this year both have grown 227% and 25% respectively. There is more money now than there was at the beginning of the year, 1/4 more. Based on this metric alone, one dollar is worth 3/4 of what it was worth at the beginning of 2020. Today:
  • One BTC is worth 2.27 BTC from a year ago
  • One USD is worth 0.75 USD from a year ago
The price of Bitcoin is going up because it appreciates in value, but also because there are more dollars. How could we track the value increase of Bitcoin while accounting for the dollar devaluation? Another way of formulating that question is: How can we track the purchasing power of Bitcoin?
Historically, the price of gold has kept up with the growth of the money supply. (See Lyn Alden's core gold model) Gold is a well-established store of value. Measuring the price of Bitcoin relative to the value of gold is a way to keep track of its purchasing power. That is what the first graph plots, the cost of Bitcoin denominated in grams of gold .
  • The last ATH was 484.76 grams of gold .
  • On Nov 16, the resistance of 303.07 grams was crossed, putting the price on a trajectory to reach the previous ATH .
  • Bitcoin still needs to rise another 25% to make a new ATH in gold terms.
The second graph plots the gold price (USD) for the quantities (grams) identified as support or resistance in the first graph. It is fascinating to see that the USD/Gold-grams levels result in an even tighter fit than the manually drawn price levels.

You can add the AU usd/grams levels to a chart with this indicator gold price levels denominated in usd/grams
Comment: updated indicator:

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