Skip to content
Subscriber Only

Don’t Count on Bitcoin to Be a Sure-Thing Inflation Hedge

Cryptocurrency’s history is too short to judge whether it can provide protection against rising prices.

relates to Don’t Count on Bitcoin to Be a Sure-Thing Inflation Hedge
Illustration: Oscar Bolton Green for Bloomberg Businessweek
From

Hardcore Bitcoin enthusiasts say the digital coin is the world’s best hedge against rising consumer prices. The logic: Unlike U.S. dollars or any other normal currency, it’s designed to have a limited supply, so it can’t be devalued by a government or a central bank distributing too much of it.

Almost every bull case on Bitcoin has looked prescient lately—the cryptocurrency is trading at around $57,000 a coin, up from about $5,000 a year ago—so that’s added some buzz to this inflation story. With the economic outlook perking up, Covid-19 cases falling, and greater amounts of fiscal stimulus on the horizon, investors in all kinds of assets seem to expect a bit of a rise in prices. But that’s coming from a very modest base. Over the past year, the inflation rate in the U.S. has been 1.7%.