Cryptocurrency as an Alternative Inflation Hedge?

23 Pages Posted: 2 Aug 2021 Last revised: 28 Nov 2022

See all articles by Lee A. Smales

Lee A. Smales

University of Western Australia

Date Written: November 23, 2022


We examine the association of Bitcoin, and other cryptocurrency, returns with changes in inflation expectations, forming a comparison with gold, a traditional inflation hedge. After controlling for uncertainty in economic policy, cryptocurrencies, and financial markets, we show that cryptocurrency returns are positively related to changes in US inflation expectations under a limited set of circumstances. However, unlike with gold, the identified relationship is only significant for short-term inflation expectations, and when inflation or market-implied inflation expectations are below 2%. Moreover, cryptocurrency returns tend to be lower on days with monthly CPI announcements and respond negatively to CPI surprises. Our results suggest that cryptocurrencies do not currently offer investors a viable alternative to gold in hedging inflation.

Keywords: Cryptocurrency, Gold, Inflation expectations, Bitcoin, Breakeven inflation rate

JEL Classification: G10, G14, E31

Suggested Citation

Smales, Lee A., Cryptocurrency as an Alternative Inflation Hedge? (November 23, 2022). Available at SSRN: or

Lee A. Smales (Contact Author)

University of Western Australia ( email )

UWA Business School
35 Stirling Highway
Perth, Western Australia 6009

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