Bitcoin is often promoted as an inflation hedge, but NYDIG’s global head of research, Greg Cipolaro, argues that the data does not strongly support this narrative.

“The community likes to pitch Bitcoin as an inflation hedge, but unfortunately, here, the data is just not strongly supportive of that argument.”

Cipolaro emphasized that the correlation between bitcoin and inflation is neither consistent nor particularly high, with expectations of inflation serving as a somewhat better—though still limited—indicator for price movements.

Dollar movements drive bitcoin and gold

NYDIG’s analysis highlights that both gold and bitcoin tend to rise when the US dollar falls, as measured by the US Dollar Index.

Cipolaro noted that bitcoin’s inverse correlation to the dollar is newer and somewhat less consistent than gold’s, but the trend has become clearer over time.

NYDIG expects this relationship to strengthen as bitcoin becomes more integrated into traditional financial markets.

Interest rates and money supply as key factors

Cipolaro identified interest rates and the global money supply as the primary macroeconomic drivers for both bitcoin and gold.

Historically, gold has performed better when interest rates fall, and a similar pattern has developed for bitcoin.

Looser monetary policy and increased global money supply have typically benefited bitcoin’s price.

Bitcoin’s evolving market role

Cipolaro concluded that while gold has functioned as a real-rate hedge, bitcoin now serves as a liquidity barometer in global markets. He stated:

“If we were to summarize how to think about each asset from a macro factor perspective, it is that gold serves as a real-rate hedge, whereas Bitcoin has evolved into a liquidity barometer.”

This shift reflects bitcoin’s growing connection to traditional finance, with its price affected by the same macroeconomic conditions that impact established assets like gold.