Bitcoin remains unmatched as a global inflation hedge

Opinion by: Jupiter Zheng, Partner Liquid Fund at HashKey Capital

Whenever Bitcoin falls in value, the narrative is always the same: It’s failing as a hedge against inflation. In the eyes of critics, Bitcoin is not the “digital gold” that so many others claim it to be.

With gold hitting all-time highs, these critics have grown louder. If Bitcoin is an inflation hedge, they ask, why isn’t it also rallying as investors seek safety?

Even in today’s bearish, high-inflation environment, the cardinal truth holds: Bitcoin is an inflation hedge — arguably the most important one for long-term capital preservation the world has seen. 

Strength in scarcity

Bitcoin has a hard cap of 21 million coins, with full circulation expected by 2140. This built-in scarcity mirrors gold, which has historically served as an inflation hedge. Bitcoin has outperformed gold during multiple periods, such as the COVID-19 era, when global markets were flooded with liquidity.

Like gold, Bitcoin works as an inflation hedge over the long term, not the short term. Critics focus too much on short-term volatility and ignore broader trends. Bitcoin has consistently been used as a store of value during extended periods of money printing.

Bitcoin is not controlled by any central bank or politician. It’s a decentralized, peer-to-peer system governed by math and consensus — not by election cycles or political pressure. In places like Zimbabwe or Venezuela, where governments destroyed their currencies, Bitcoin has offered a more stable alternative. When faith in traditional systems weakens, Bitcoin often strengthens. 

Consensus beats centralization

Bitcoin’s value isn’t just in its price — it’s in its design. Countries like the US, EU, UAE, Singapore, and Hong Kong have advanced regulations around Bitcoin, but its relevance goes far beyond developed economies.

Inflation is an inconvenience in wealthier countries — rising grocery bills and pricier eggs. In struggling economies, inflation can signal political and financial collapse. Bitcoin offers a way out. It’s not theoretical anymore — it’s happening in real life.

During Greece’s 2015 crisis, citizens used Bitcoin to bypass capital controls. In Venezuela and Argentina, where national currencies lost most of their value, Bitcoin became a tool for survival. People used it to preserve wealth, access global markets, and transact on decentralized exchanges.

Recent: Bitcoin may rival gold as inflation hedge over next decade — Adam Back

Bitcoin’s borderless, censorship-resistant nature is critical. It doesn’t rely on the decisions of any one institution. It’s protected from debt monetization, interest rate manipulation, and geopolitical pressures. Bitcoin runs on consensus, not command. 

Consensus matters most when trust in institutions is low. This immutability is a characteristic that investors are undervaluing — and may not appreciate until they need it the most. 

Portability is power

Bitcoin’s resilience also matters in developed markets — especially when traditional systems fail. Banks can collapse. Stock markets can crash. Payment processors can go offline. Bitcoin doesn’t sleep. It runs 24/7, 365 days a year.

During the Silicon Valley Bank collapse in March 2023, Bitcoin jumped 23% as investors sought safety outside the traditional banking system. Bitcoin’s availability and independence became its advantage.

In a bank failure like Lehman Brothers in 2008, consumers can lose access to their funds for months or even years. Bitcoin, held in self-custody, remains in your control — as long as you have the private keys. No third party is needed.

Payment networks like Visa or SWIFT can also become chokepoints — and targets for hackers who want to disrupt the global payments infrastructure. Bitcoin isn’t subject to those bottlenecks. Miners, not banks, verify it. While congestion can slow transactions, scaling solutions are evolving to improve speed and cost.

Bitcoin’s digital nature makes it especially valuable during capital controls, inflation, or crisis. It’s hard to seize, devalue, or freeze — giving individuals more autonomy than traditional financial systems allow.

A more nuanced term: speculative hedge  

Based on these characteristics, Bitcoin is unmistakably a hedge against inflation. Maybe we need a better term for Bitcoin’s central role in our financial futures.

A more precise term might be speculative hedge — it offers long-term protection thanks to scarcity, consensus and decentralization. 

Yet, adoption and price volatility are still hurdles to Bitcoin dethroning gold as a true global inflation hedge. Still, there are encouraging signs. Companies like Strategy, GameStop, Block and MassMutual have added Bitcoin to their balance sheets as a treasury strategy — with some estimates pointing to one in four companies in the S&P 500 following suit by 2030. More governments are exploring Bitcoin reserves.

As a speculative hedge, Bitcoin shines during inflation, currency devaluation, or systemic instability. It’s not a cure-all. Its effectiveness depends on user education, internet access, and geopolitical context. If connectivity disappears entirely — say, during a nuclear war — there will be bigger problems than inflation.

Bitcoin is best understood as a financial lifeboat. It’s not perfect. It takes effort to use it correctly. It’s a small measure of preparation for life’s unknowns. But when the ship starts sinking, you’ll wish you had one.

Opinion by: Jupiter Zheng, Partner Liquid Fund at HashKey Capital.