Bitcoin Did Not Reach a New All-Time High Before the 4th Halving

Much has been said over the past several weeks about Bitcoin reaching a new all-time high before the halving, unlike any previous halving cycle. With the first three Bitcoin halvings, where the block reward is cut in half, Bitcoin had not reached a new all-time high after exiting a bear market. Bitcoin's all-time high in November 2021 was about $69,000. Some argue that what happened in November 2021 was very unusual, and prefer the lower value of April 2021's high of about $63,770. In March, Bitcoin reached nearly $73,800. A new all-time high, right? Perhaps not. Let's look at why.

During 2021, the US economy began experiencing rising high inflation. Inflation rose until June 2021, reaching 9.1% according to the headline inflation rate as measured by the Consumer Price Index (CPI). Inflation continues to remain above the Federal Reserve's target of 2%. If we adjust for the inflation rate we find that Bitcoin actually has not reached a new all-time high. To do so, we'll focus on the all-time highs from April 2021 and November 2021.

To calculate the new all-time high barrier from April 2021's all-time high we'll use the following data:

• In April 2021, Bitcoin reached a new all-time high of about $64,900 (CPI).
• In April 2022, the year-over-year inflation rate was 8.3% (CPI).
• In April 2023, the year-over-year inflation rate was 4.9% (CPI).
• In March 2024, the year-over-year inflation rate was 3.5% (CPI). We're missing one month here, so we'll estimate by multiple the inflation rate by 13/12 (aka 1.083) to add the extra month and get 3.79%.

To calculate what Bitcoin's April 2021 all-time high would be in today's dollars we simply multiply:

$64,900 * 1.083 * 1.049 * 1.0379 = $76,525.14

Using April 2021's all-time high, Bitcoin's value would have needed to exceed $74,982.64 to reach a new all-time high. It missed that mark by over $2,700.

To calculate the new all-time high barrier from November 2021's all-time high we'll use the following data:

• In November 2021, Bitcoin reached a new all-time high of about $69,000.
• In November 2022, the year-over-year inflation rate was 7.1% (CPI).
• In November 2023, the year-over-year inflation rate was 3.1% (CPI).
• In April 2024, the year-over-year inflation rate was 3.5% (CPI) for March. This isn't a full year so we'll simply multiply the inflation rate by 4/12 (aka 0.33) to compensate for the 5 months since November 2023. When we do that we get 1.17%.

To calculate what Bitcoin's November 2021 all-time high would be in today's dollars we simply multiply:

$69,000 * 1.071 * 1.031 * 1.0117 = $77,081.29

Using November 2021's all-time high, Bitcoin's value would have needed to exceed $77,081.29 to reach a new all-time high. It missed that mark by almost $3,300.

Now that we've determined that no matter how you look at it Bitcoin has not achieved a new all-time high since the last cycle, the questions remain: How will we know if Bitcoin achieves a new all-time high? Which all-time high do we use?

Well, if we add inflation to Bitcoin's April 2021 price until November 2021, maybe that will help us decide. From April to November there are seven months. The inflation rate in November 2021 was 6.8%. For this we'll multiply by the seven months, or 7/12 (aka 0.583), and get 3.97%. This is actually a little high since inflation was lower before November 2021, so this is more of a high estimation.

$64,900 * 1.0397 = $67,476.53

That is still lower than the November 2021 all-time high of $69,000, but more than $1,500.

It should also be noted that Bitcoin's price actually rose to about $66,998 (you'll see in a moment while I'm being more accurate here) in October 2021, before dropping down to below $58,000 later that month, and then rising to the November 2021 all-time high. From April to October there are six months. The inflation rate in October 2021 was 6.2%. For this we'll multiply by the six months, or 6/12 (aka 0.5), and get 3.1%. Just like the previous calculation, this is actually a little high since inflation was lower before October 2021.

$64,900 * 1.031 = $66,911.90

It's impossible to accurately predict when Bitcoin will reach a new all-time high. Some are calling for it before the end of the year, while others are saying sometime in 2025. Whenever Bitcoin appears to rise to new all-time highs it will be necessary to adjust for inflation to be sure.

All that can be said with any certainty is that if you believe Bitcoin is a good investment for yourself and your financial plan, then you should be allocating to it according to your financial plan and your investment policy statement. If you don't have a financial plan or an investment policy statement, then Escient Financial can help you with both so that you can get the right investment strategy to achieve your goals, whether or not that strategy includes Bitcoin or any other cryptocurrency or digital asset. to get started, go ahead and...