Bitcoin does not consistently serve as a hedge against inflation. Instead, according to NYDIG’s global head of research, Greg Cipolaro, it has transformed into a measure of market liquidity.

Inflation does not majorly influence Bitcoin’s price; rather, a weakening US dollar tends to elevate the cryptocurrency’s value, similar to gold. “The community likes to pitch Bitcoin as an inflation hedge, but unfortunately, here, the data is just not strongly supportive of that argument,” Cipolaro stated in a recent note.

He further elaborated that the links between Bitcoin and inflationary indicators are not particularly strong. Bitcoin advocates have long promoted it as “digital gold” that could counter inflation due to its limited supply and decentralized nature. However, it is becoming more integrated into traditional financial structures.

Cipolaro pointed out that both Bitcoin and gold usually rise as the US dollar weakens, although this trend for Bitcoin is less consistent.

Furthermore, interest rates and the money supply are pivotal macroeconomic drivers affecting Bitcoin’s fluctuations. Historically, gold prices rise when interest rates decline; Bitcoin appears to follow this correlation as it matures in the financial ecosystem. This reinforces the argument that while gold acts as a hedge against real rates, Bitcoin has matured into an indicator of market liquidity.