Does Bitcoin Hedge Against Inflation The Way Gold Does
Historically, gold has remained a haven for investors against currency value decline and to protect purchasing power. When cash and bonds lose their actual value, investors tend to hedge to preserve their wealth in unstable market conditions. In 1970, gold delivered a 35% annual return, especially when the inflation rate was 8.8%.
Just like gold, bitcoin’s appeal is emerging. It is especially related to its fixed supply of 21 million coins. Its decentralization and resistance to monetary debasement play a crucial role in making Bitcoin a safe investment spot for investors.
However, all central banks are more focused on gold reserves than on bitcoin. BTC is absent from all sovereign portfolios because investor psychology diverges by generations. Multiple cultural and psychological factors influence gold buying, and all seasoned investors trust gold’s tangibility.
However, younger generations are more drawn to Bitcoin due to their tech-loving nature. According to Netcoins, “Bitcoin is frequently compared to gold as a potential hedge against inflation, but its track record is inconsistent.” Similarly, CoinDesk, quoting NYDIG, stated that “Bitcoin doesn’t consistently act as a hedge against inflation, but it has evolved into a liquidity barometer.”
Performance and Volatility: What the Data Shows
From 2020 to 2025, the price of Bitcoin rose by 863%. On the other hand, during the same period, gold surged by up to 90%. Similarly, Bitcoin’s inflation rate dropped to 0.85% after its 2024 halving. It is lower than the gold’s expected annual supply growth, which is 2.3%.
During all inflation spikes, gold hit a record high. However, it also saw negative returns during the early 1980s. On the other hand, Bitcoin’s correlation with inflation is never stable. According to GlobePRWire, “Bitcoin was supposed to be the inflation killer… Then actual inflation showed up, and things got weird. The Bitcoin price today, hovering around $124,000, might seem like vindication for the inflation hedge crowd. But back in 2022, when inflation peaked at 9%, Bitcoin fell sharply to $16,000, a reminder that its relationship with inflation remains inconsistent in practice.”
Similarly, NYDIG’s Greg Cipolaro noted that “The correlations with inflationary measures are neither consistent nor are they extremely high.” In comparison to gold, bitcoin’s volatility is consistently high. It was approximately 2.2x that of gold. However, ETF inflows helped reduce bitcoin volatility, with daily swings of up to 1.8%.
The Finbold emphasized that “Gold is a commodity with a reputation for flourishing during recessions and bear markets when investors abandon riskier assets like equity for ‘safe’ options such as gold and bonds.”
Structural Differences and Investor Psychology
Held by central banks and all sovereign powers, gold serves as a global reserve asset. However, bitcoin adoption by global institutions, especially in 2025, is also expected to rise. As of now, institutional portfolios value gold at $19.2 billion, while bitcoin reserves account for 59% of the total global portfolio. As NYDIG explains, “Bitcoin doesn’t consistently act as a hedge against inflation, but it has evolved into a liquidity barometer.”
Now, investors’ behavior is more risk-taking than in the past. Gold is favoured by those who prefer risk-off investments and an environment. However, bitcoin investors are growing with more technical and encouraging behavior.
