Inflation & the Purchasing Power of Bitcoin vs Fiat

What is Inflation?

Inflation is when the purchasing power of the local currency goes down. It is the rising prices of goods and services, leading to being able to buy less with the currency. 

How do we measure inflation? 

The Consumer Price Index (CPI) is a common method used to measure inflation. It is a weighted average of various goods and services. The CPI measures the percentage change from month to month of those goods and services.

Why can I afford less and less each year?

There are various reasons why your purchasing power goes down over time. Some examples may be:

Excess Money:

When Central Banks print more money to distribute to the people, there is an excess supply of money. Households have more money to compete to purchase the same amount of goods, resulting in increased prices.

Supply Chain Disruptions:

If there are disruptions in the supply chain, resulting in less goods being produced or for sale, this will cause a shortage of goods for the current demand, resulting in increased prices.