Bitcoin has long been described as “digital gold” and, like the precious metal, is often touted as a hedge against inflation. But new data from NYDIG suggests the narrative doesn’t hold water.
In his weekly summary, Greg Cipolaro, global head of research at NYDIG, found that inflation is not a reliable factor that determines the price of Bitcoin. Monthly correlation data shows that the relationship between Bitcoin and inflation is both inconsistent and weak.
“We know the community likes to present bitcoin as a hedge against inflation, but unfortunately the data here simply does not strongly support that argument,” Cipolaro wrote. “Correlations with inflationary measures are neither consistent nor extremely high.”
Gold, the traditional hedge against inflation, is not faring much better. Its correlations with inflation have often been negative and fluctuate from period to period.
This challenges the conventional idea that rising inflation automatically raises the price of gold, with Cipolaro himself writing that it is surprising that for gold, inflationary measures are inversely correlated.
So what’s moving Bitcoin and gold? Real interest rates and money supply.
For gold, falling real interest rates, those adjusted for inflation, have long been a sign of rising prices. Bitcoin, although relatively new to financial markets, is now exhibiting a similar trend.
Cipolano found that the inverse relationship between Bitcoin and real rates has strengthened in recent years, likely due to its increasing integration into the broader financial system.
The takeaway, according to NYDIG: Investors should stop viewing bitcoin as a hedge against inflation.
Instead, it behaves more like a measure of global liquidity, moving in response to interest rates and capital flows, not the cost of groceries or gasoline.
“If we had to summarize how to look at each asset from the perspective of macroeconomic factors, it is that gold serves as a real rate hedge, while bitcoin has become a liquidity barometer,” Cipolaro concluded.
