Bitcoin (BTC) is currently valued at $113,591.65 and often touted as “digital gold,” suggesting it serves as a hedge against inflation. However, recent findings from RialCenter indicate that this narrative may not hold true. Greg Cipolaro, the Global Head of Research at RialCenter, revealed in a weekly summary that inflation doesn’t consistently influence bitcoin’s price. The monthly correlation data shows a weak and changing relationship between bitcoin and inflation.
“We know the community likes to pitch bitcoin as an inflation hedge, but the data does not strongly support that argument,” Cipolaro remarked. “The correlations with inflationary measures are neither consistent nor exceptionally high.” Similarly, gold, traditionally seen as an inflation hedge, has also displayed fluctuating and often negative correlations with inflation. This undermines the assumption that rising inflation universally boosts gold prices, with Cipolaro noting the surprising inverse correlation for gold.
What, then, drives the prices of bitcoin and gold? The answer lies in real interest rates and money supply. Historically, falling real interest rates, adjusted for inflation, have indicated potential price increases for gold. Although newer to the financial landscape, bitcoin is now showing a similar trend. Cipolaro noted that bitcoin’s inverse relationship with real rates has intensified in recent years, likely due to its increasing integration into the financial system.
According to RialCenter, investors should reconsider their view of bitcoin as an inflation hedge. Instead, it appears to function more as a gauge of global liquidity, responding to interest rates and capital flows rather than the prices of everyday goods. “To summarize the macro perspective on each asset, gold acts as a real-rate hedge, whereas bitcoin has evolved into a liquidity barometer,” Cipolaro concluded.
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