 
 
A new NYDIG research study suggests that Bitcoin (BTC) doesn’t serve as a direct hedge against inflation, as several experts have touted. This contradicts a decade-old principle sparking new debates among digital asset circles. However, the asset class has become more closely linked to macroeconomic factors after a long period of correlation with the stock market.
Bitcoin Is Not A Hedge Against Inflation
According to the report, current data does not support Bitcoin as an inflation hedge. Greg Ciporalo, NYDIG global research head, noted the correlations often cited with inflationary measures are not consistent over the years. Instead, the expectation of inflation remains a better gauge in the same period, and both metrics are not closely related.
For years, the crypto community has touted Bitcoin as a hedge against inflation amid massive price gains. This led to a surge in retail holders, and a similar argument also bolstered institutional investors looking to strengthen their balance sheet. Amid rising inflation, an asset with higher prices could better protect retail investment than fiat.
While gold was the signature asset for many decades, crypto enthusiasts argued that Bitcoin trumps gold due to its massive surge, and other use cases ultimately pointed to the fixed supply.
“The community likes to pitch Bitcoin as an inflation hedge, but unfortunately, here, the data is just not strongly supportive of that argument… “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. Bitcoin also has an inverse correlation to the US dollar.”
 
However, Cipolaro explained that a weak dollar tends to strengthen Bitcoin and the yellow metal. A look at the dollar index shows this trend over the last five years, though it’s newer than gold’s. As the asset becomes more rooted in traditional finance, researchers expect more inverse correlation with the dollar.
This year, a weakened dollar, driven by new U.S. tariffs and subsequent retaliatory measures, served as a tailwind for more Bitcoin acquisitions. Further, Cipolaro added that interest rates are another major determinant of Bitcoin and gold prices. Central bank’s decisions to slash policy rates often trigger a bullish momentum as whales have access to more capital while tightening measures lower prices. In this case, heavy investors move funds out of risky assets to more stable markets.
Source: https://zycrypto.com/weak-dollar-not-inflation-fuels-bitcoins-gains-nydig-knocks-crypto-experts/