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Is bitcoin an inflation hedge?

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  • Rodriguez, Harold
  • Colombo, Jefferson

Abstract

Spot bitcoin ETFs have been recently approved in the U.S., increasing retail and institutional investors’ attention to crypto. To contribute to the debate on whether bitcoin protects against inflation, we analyze the effect of inflation shocks on bitcoin returns through the estimation and inference of Vector Autoregressive Models (VARs), identifying inflation shocks as surprises in the U.S.’s CPI and Core PCE announcements. Based on monthly data between August 2010 and January 2023, the results indicate that bitcoin returns increase significantly after a positive inflationary shock, corroborating empirical evidence that bitcoin can act as an inflation hedge. However, we observe that bitcoin’s inflationary hedging property is sensitive to the price index – it only holds for CPI shocks – and to the period of analysis – the hedging property stems primarily from sample periods before the increasing institutional adoption of BTC (“early days”). Notably, the inflation hedge property of bitcoin (Gold) has disappeared (strengthened) from the COVID-19 outbreak onwards. We conclude that bitcoin’s inflation-hedging property is context-specific and likely diminishes as it achieves broader adoption and becomes more integrated into mainstream financial markets.

Suggested Citation

  • Rodriguez, Harold & Colombo, Jefferson, 2025. "Is bitcoin an inflation hedge?," Journal of Economics and Business, Elsevier, vol. 133(C).
    • Handle: RePEc:eee:jebusi:v:133:y:2025:i:c:s0148619524000602
    DOI: 10.1016/j.jeconbus.2024.106218
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    More about this item

    Keywords

    Bitcoin; Hedge against inflation; Unexpected inflation; Surprises in CPI; Surprises in PCE;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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