Inflation-Adjusted Price IndicatorThis indicator allows traders to adjust historical prices for inflation using customizable CPI data. The script computes the adjusted price by selecting a reference date, the original price, and the CPI source (US CPI or custom input) and plots it as a line on the chart. Additionally, a table summarizes the adjusted price values and average and total inflation rates.
While the indicator serves as a standalone tool to understand inflation's impact on prices, it is a supportive element in more advanced trading strategies requiring accurate analysis of inflation-adjusted data.
Disclaimer
Please remember that past performance may not be indicative of future results.
Due to various factors, including changing market conditions, the strategy may no longer perform as well as in historical backtesting.
This post and the script don’t provide any financial advice.
Inflationadjusted
BTC/USD Inflation priced in! ~Period 2009 - 2023 (by TAS)The script creates a custom indicator titled "BTC Adjusted for Economic Factors.
Adjusted BTC Price is plotted in red, making it more prominent. The adjusted price is Bitcoin's historical closing prices adjusted for cumulative inflation over time, based on the Core Consumer Price Index (CPI) annual inflation rates from 2009 onwards.
The script calculates the adjusted price of Bitcoin by taking into account the effect of inflation on its value. It uses annual CPI rates for each year from 2009 to 2022 to calculate a cumulative inflation factor. The script assumes a placeholder inflation rate of 2.5% for 2023, indicating that this value should be updated when the actual rate is available. The script suggests adding CPI rates for additional years as they become available to maintain the accuracy of the adjustment.
Here's a breakdown of how the script works:
Core CPI Annual Inflation Rates: It starts by defining the annual inflation rates for each year from 2009 to 2022, expressed as a percentage divided by 100 to convert to a decimal.
Cumulative Inflation Calculation: The script calculates cumulative inflation starting from the year 2009 up to the current year. For each year that has passed since 2009, it multiplies the cumulative inflation factor by (1 + cpiRate), where cpiRate is the inflation rate for that year. This effectively compounds the inflation rate over time.
Adjusting Bitcoin's Price: The script then adjusts Bitcoin's closing price (close) for the calculated cumulative inflation to get the adjusted price (adjustedPrice).
Plotting the Prices: Finally, it plots both the original and the adjusted Bitcoin prices on the chart, allowing users to visually compare how inflation has theoretically impacted Bitcoin's value over time.
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Important to notice, Fib. Retracements from the 2017 cycle top to the recent top (¬80K) doesn't look invalidated.
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Inputs and feedback are welcome!
Inflation Adjusted Performance: Ticker/M2 money supplyPlots current ticker / M2 money supply, to give an idea of 'inflation adjusted performance'.
~In the above, see the last decade of bullish equities is not nearly as impressive as it seems when adjusted to account for the FED's money printing.
~Works on all timeframes/ assets; though M2 money supply is daily data release, so not meaningful to plot this on timeframe lower than daily.
~To display on same pane; comment-out line 6 and un-comment line 7; then save, remove and re-add indicator.
~Scale on the right is meaningless; this indicator is just to show/compare the shape of the charts.
