Bitcoin has long been described as “digital gold” and, like the precious metals, is often set up as a hedge against inflation. But new data from NYDIG suggests that the narrative is not true.
In his weekly summary, NYDIG’s global head of research Greg Cipolaro found that inflation is not a reliable factor driving bitcoin’s price. Monthly correlation data shows that bitcoin’s relationship to inflation is both inconsistent and weak.
“We know the community likes to pitch bitcoin as an inflation hedge, but unfortunately the data here just doesn’t strongly support that argument,” Cipolaro wrote. “Correlations with inflation measures are neither consistent nor extremely high.”
Gold, the traditional inflation hedge, isn’t doing much better. Its correlations with inflation have often been negative and fluctuate from one period to another.
This challenges the conventional view that rising inflation automatically increases gold prices, with Cipolaro himself writing that it is surprising that inflation measures for gold are inversely correlated.
So what is moving bitcoin and gold? Real interest rates and money supply.
For gold, falling real interest rates, those adjusted for inflation, have long signaled price increases. Bitcoin, although relatively new to the financial markets, is now exhibiting a similar pattern.
Cipolano found that bitcoin’s inverse relationship with real interest rates has strengthened in recent years, likely a result of its growing integration into the broader financial system.
The takeaway, according to NYDIG: investors should stop thinking of bitcoin as an inflation hedge.
Instead, it behaves more like a measure of global liquidity that moves in response to interest rates and capital flows, not the cost of groceries or gasoline.
“If we were to summarize how to think about each asset from a macro factor perspective, it is that gold serves as a real interest rate hedge, whereas bitcoin has evolved into a liquidity barometer,” Cipolaro concluded.
