Are cryptos a suitable hedge against inflation?

In recent years, inflation has surged globally, diminishing the purchasing power of fiat currencies. This shift has prompted many investors to seek alternative assets as a protection against inflation, with cryptocurrencies gaining attention as one of these options. Bitcoin, specifically, is often seen as a potential safeguard due to its decentralised structure and the fact that a limited supply of 21 million Bitcoins can be created. Yet, the question of whether cryptocurrencies can reliably shield against inflation remains complicated, given their volatile nature.

In order to be a hedge against inflation an asset needs to protect an investor from the erosion in purchasing power due to rising prices. Traditional inflation hedges, such as gold, real estate and commodities, typically preserve or increase in value when living costs increase. Gold, for example, often rises in value when inflation rises, making it a trusted asset for some during times of financial instability. Bitcoin is of…