NEW YORK / LONDON (IT BOLTWISE) – Bitcoin is often viewed as digital gold and an inflation hedge. But current data from NYDIG shows that this assumption is untenable. Instead, Bitcoin acts more as an indicator of global liquidity, influenced by interest rates and capital flows.
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Bitcoin, often referred to as digital gold, has traditionally been marketed as a hedge against inflation. But recent research from NYDIG suggests that this role for Bitcoin is not supported by data. Greg Cipolaro, NYDIG’s global head of research, highlights that the correlation between Bitcoin and inflation is both inconsistent and weak. This finding challenges the widespread assumption that Bitcoin is a reliable hedge against inflation.
Interestingly, gold, the traditional inflation hedge, also shows a weak and often negative correlation with inflation. This observation is surprising since it is widely believed that rising inflation automatically leads to higher gold prices. Cipolaro emphasizes that gold’s inverse correlation with inflationary measures is remarkable and challenges the conventional view.
So what is driving the prices of Bitcoin and gold? According to NYDIG, it is real interest rates and the money supply. For gold, falling real interest rates adjusted for inflation have traditionally signaled price increases. Bitcoin is now showing a similar pattern as its inverse relationship with real interest rates has grown stronger in recent years. This is likely due to its increasing integration into the broader financial system.
NYDIG’s conclusion is clear: investors should stop viewing Bitcoin as an inflation hedge. Instead, Bitcoin behaves more like a measure of global liquidity, responding to interest rates and capital flows, not the cost of food or gasoline. Cipolaro summarizes that gold serves as a hedge against real interest rates, while Bitcoin has become a liquidity barometer.
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