2021 in retrospective
As we know, inflation rose its ugly head in 2021 with the CPI index increasing 7% on an annual basis. How did bitcoin hold up as a store of value?
For this article, I will define Store of Value as a value of the energy expended as labor in which we were paid. We work, create value, and receive a portion of that added value in return as a paycheck. Any funds not used on expenses can be saved for use later. The goal should be to find the best solution to store this value going forward.
Our most common expenses are food, clothing, housing, transportation, health care, entertainment, and insurance. Others have childcare, prescriptions, credit card payments, mobile phone, Internet, cable / streaming services, travel, and leisure. Costs can be categorized as fixed or variable. Examples of fixed cost expenses are mortgage / rent, internet / cable, insurance (life, car, home, or rental), health insurance, etc. Variable costs are expenses such as groceries, utilities, dining out, home delivery, clothing, day care, health care, prescriptions, transportation, car repairs, etc.
According to the Bureau of Labor Statistics, the 12-month percent change in CPI was 7% for 2021 (January 1 – December 31). Source: https://www.bls.gov/news.release/pdf/cpi.pdf
It’s interesting to note that while 7% was the average for all items, some key expense categories stand out in the BLS report referenced above.
Those are:
Energy commodities (gasoline and fuel oil) 48.9%
Utility (piped) gas service 24.1%
Used cars and trucks 37.3%
How did the traditional “Stores of Value” do in comparison to the CPI last year? NOTE: If you held your funds that returned less than the CPI, you lost future purchasing power.
12-month bank CD 0.85%
S&P 500 index* 28.68% including dividends
Dow 30 index* 18.73%
REITs (real estate) ** 39.88%
Gold*** -3.6%
Silver** * -11.5%
Sources:
* Forbes.com
** REIT.com
*** Marketwatch.com
How did bitcoin hold up? It appreciated 48.8%, keeping pace with every key expense category in the CPI.
The closing price for bitcoin on January 1, 2021, was $32,119*
The closing price for bitcoin on December 31, 2021, was $47,796*
* Source: Nomics.com
Author: Stephen Stubblefield, Sanctuary DEX Technical Advisor