bitcoin It has long been described as “digital gold” and, like the precious metal, is often presented as a hedge against inflation. But new data from the NYDIG suggests that narrative doesn’t hold up.
In his weekly summary, NYDIG global head of research Greg Cipolaro found that inflation is not a reliable factor driving the price of bitcoin. Monthly correlation data shows that bitcoin’s relationship with inflation is both inconsistent and weak.
“We know that the community likes to present bitcoin as a hedge against inflation, but unfortunately, here, the data simply does not strongly support that argument,” Cipolaro wrote. “The 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 view that rising inflation automatically drives up gold prices, and Cipolaro himself writes that it is surprising that, in the case of gold, inflationary measures are inversely correlated.
So what drives bitcoin and gold? Real interest rates and money supply.
In the case of gold, falling real interest rates, those adjusted for inflation, have long signaled price increases. Bitcoin, although relatively new to the financial markets, is now showing a similar pattern.
Cipolano found that bitcoin’s inverse relationship with real rates has strengthened in recent years, likely as a result of its increasing integration into the broader financial system.
The bottom line, according to NYDIG: Investors should stop thinking of bitcoin as a hedge against inflation.
Instead, it behaves more like a measure of global liquidity, moving in response to interest rates and capital flow, not the cost of food or gasoline.
“If we were to summarize how to think about each asset from a macro factor perspective, it would be that gold serves as a real rate hedge, while bitcoin has evolved into a liquidity barometer,” Cipolaro concluded.
