NYDIG states that inflation does not have a significant impact on Bitcoin prices, contrary to what many believe, but a weaker dollar does help to push up cryptocurrency and gold prices.
"Communities like to promote Bitcoin as an inflation hedge, but unfortunately, the data here does not strongly support that argument," said Greg Cipolaro, NYDIG's global research director, in a report on Friday.
"The correlation with inflation indicators is neither consistent nor particularly high," he added. Cipolaro noted that inflation expectations are a "better indicator" for Bitcoin, but still not closely related.
Bitcoin supporters have long praised Bitcoin as "digital gold" and an inflation hedge due to its fixed hard supply and decentralized nature. However, it has recently become more integrated with and correlated to the traditional financial system.
Cipolaro added that real gold is not much better as an inflation hedge, as it has a negative correlation with inflation and performs inconsistently over different periods, which he said is surprising for "inflation protection hedging tools."
Cipolaro stated that as the dollar declines relative to other currencies (as measured by the dollar index), gold typically rises.
"Bitcoin is also negatively correlated with the dollar," he added. "While this relationship is less consistent and more recent than gold's, the trend is there."
Cipolaro indicated that NYDIG expects the negative correlation between Bitcoin and the dollar to strengthen as Bitcoin "becomes more deeply embedded in the traditional financial market ecosystem."
Interest rates and money supply are the two main macroeconomic factors that Cipolaro mentioned as influencing the trends of Bitcoin and gold.
Gold typically rises when interest rates fall and declines when interest rates rise. Cipolaro stated that a similar relationship has "emerged and strengthened over time" for Bitcoin.
He added that the relationship between global monetary policy and Bitcoin has also been "consistently positive" and strong over the years, with loose monetary policy generally favoring Bitcoin.
Cipolaro noted that the similar price trends of Bitcoin relative to macroeconomic conditions compared to gold demonstrate its "increasing integration into the global monetary and financial landscape."
"If we were to summarize how to view each asset from a macro perspective, it would be that gold acts as a hedge against real interest rates, while Bitcoin has evolved into a liquidity barometer," he added.
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Original: “NYDIG: Bitcoin (BTC) is not an inflation hedge, but performs well when the dollar fluctuates”
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