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Bitcoin’s role as an inflation hedge depends on where one lives — Analyst

For years, inflation was primarily a concern for emerging markets, where volatile currencies and economic instability made rising prices a persistent challenge. However, in the wake of the COVID-19 pandemic, inflation became a global issue. Once-stable economies with historically low inflation were suddenly grappling with soaring costs, prompting investors to rethink how to preserve their wealth.

While gold and real estate have long been hailed as safe-haven assets, Bitcoin’s supporters argue that its fixed supply and decentralized nature make it the ultimate shield against inflation. But does the theory hold up?

The answer may depend largely on where one lives.

Bitcoin advocates emphasize its strict supply limit of 21 million coins as a key advantage in combating inflationary monetary policies. Unlike fiat currencies, which central banks can print in unlimited quantities, Bitcoin’s supply is predetermined by an algorithm, preventing any form of artificial expansion. This scarcity, they argue, makes Bitcoin akin to “digital gold” and a more reliable store of value than traditional government-issued money.

Several companies and even sovereign nations have embraced the idea, adding Bitcoin to their treasuries to hedge against fiat currency risk and inflation. The most notable example is El Salvador, which made global headlines in 2021 by becoming the first country to adopt Bitcoin as legal tender. The government has since been steadily accumulating Bitcoin, making it a key component of its economic strategy. Companies like Strategy in the US and Metaplanet in Japan have followed suit, and now the United States is in the process of establishing its own Strategic Bitcoin Reserve.

A Bitcoin investment strategy has paid off so far

So far, the corporate and government Bitcoin investment strategy has paid off as BTC outperformed the S&P 500 and gold futures since the early 2020s before inflation surged in the United States.

More recently, however, that strong performance has shown signs of moderation. Bitcoin remains a strong performer over the past 12 months, and while BTC’s gains outpace consumer inflation, economists caution that past performance is no guarantee of future results. Indeed, some studies suggest a correlation between cryptocurrency returns and changes in inflation expectations is far from consistent over time. 

Bitcoin’s role as an inflation hedge depends on where one lives — Analyst

Returns over the past 12 months. Source: Truflation.

Bitcoin’s role as an inflation hedge remains uncertain

Unlike traditional inflation hedges such as gold, Bitcoin is still a relatively new asset. Its role as a hedge remains uncertain, especially considering that widespread adoption has only gained traction in recent years.

Despite high inflation in recent years, Bitcoin’s price has fluctuated wildly, often correlating more with risk assets like tech stocks than with traditional inflation hedges like gold.

A recent study published in the Journal of Economics and Business found that Bitcoin’s ability to hedge inflation has weakened over time, particularly as institutional adoption grew. In 2022, when US inflation hit a 40-year high, Bitcoin lost more than 60% of its value, while gold, a traditional inflation hedge, remained relatively stable.

For this reason, some analysts say that Bitcoin’s price may be driven more by investor sentiment and liquidity conditions than by macroeconomic fundamentals like inflation. When the risk appetite is strong, Bitcoin rallies. But when markets are fearful, Bitcoin often crashes alongside stocks.

In a Journal of Economics and Business study, authors Harold Rodriguez and Jefferson Colombo said,

“Based on monthly data between August 2010 and January 2023, the results indicate that Bitcoin returns increase significantly after a positive inflationary shock, corroborating empirical evidence that Bitcoin can act as an inflation hedge.”

However, they noted that Bitcoin’s inflationary hedging property was stronger in the early days when institutional adoption of BTC was not as prevalent. Both researchers agreed that “[…]Bitcoin’s inflation-hedging property is context-specific and likely diminishes as it achieves broader adoption and becomes more integrated into mainstream financial markets.”

Bitcoin’s role as an inflation hedge depends on where one lives — Analyst

US inflation index since 2020. Source. Truflation

“So far, it has acted as an inflation hedge—but it’s not a black-and-white case. It’s more of a cyclical (phenomenon),” Robert Walden, head of trading at Abra, told Cointelegraph.

Walden said,

“For Bitcoin to be a true inflation hedge, it would need to consistently outpace inflation year after year with its returns. However, due to its parabolic nature, its performance tends to be highly asymmetric over time.”

Bitcoin’s movement right now, Walden said, is more about market positioning than inflation hedging—it’s about capital flows and interest rates.”

Argentina and Turkey seek financial refuge in crypto

In economies suffering from runaway inflation and strict capital controls, Bitcoin has proven to be a valuable tool for preserving wealth. Argentina and Turkey, two countries with persistent inflation throughout recent decades, illustrate this dynamic well.

Argentina has long grappled with recurring financial crises and soaring inflation. While inflation has shown signs of improvement very recently, locals have historically turned to cryptocurrency as a way to bypass financial restrictions and protect their wealth from currency depreciation.

A recent Coinbase survey found that 87% of Argentinians believe crypto and blockchain technology can enhance their financial independence, while nearly three in four respondents see crypto as a solution to challenges like inflation and high transaction costs.

Related: Argentina overtakes Brazil in crypto inflows — Chainalysis

With a population of 45 million, Argentina has become a hotbed for crypto adoption, with Coinbase reporting that as many as five million Argentinians use digital assets daily.

“Economic freedom is a cornerstone of prosperity, and we are proud to bring secure, transparent, and reliable crypto services to Argentina,” said Fabio Plein, Director for the Americas at Coinbase.

“For many Argentinians, crypto isn’t just an investment, it’s a necessity for regaining control over their financial futures.”

“People in Argentina don’t trust the peso. They are always looking for ways to store value outside of the local currency,” Julián Colombo, a senior director at Bitso, a major Latin American cryptocurrency exchange, told Cointelegraph.

“Bitcoin and stablecoins allow them to bypass capital controls and protect their savings from devaluation.”

Bitcoin’s role as an inflation hedge depends on where one lives — Analyst

Argentina inflation index. Source. Truflation.

Beyond individual investors, businesses in Argentina are also using Bitcoin and stablecoins to protect revenue and conduct international transactions. Some workers even opt to receive part of their salaries in cryptocurrency to safeguard their earnings from inflation.

According to economist and crypto analyst Natalia Motyl,

“Currency restrictions and capital controls imposed in recent years have made access to US dollars increasingly difficult amid high inflation and a crisis of confidence in the Argentine peso. In this environment, cryptocurrencies have emerged as a viable alternative for preserving the value of money, allowing individuals and businesses to bypass the limitations of the traditional financial system.”

While Bitcoin’s effectiveness as an inflation hedge is still up for debate, stablecoins have become a more practical solution in high-inflation economies, particularly those pegged to the US dollar.

Relative to its economic size, Turkey has emerged as a hotspot for stablecoin transactions. In the year leading up to March 2024, purchases alone accounted for 4.3% of GDP. This digital currency boom, fueled by years of double-digit inflation—peaking at 85% in 2022—and a more than 80% plunge in the lira against the dollar over the past five years, gained momentum during the pandemic.

Turkey’s Bitcoin adoption proves citizens drive adoption, not governments

Although Turkey allows its citizens to buy, hold, and trade crypto, the use of digital currencies for payments has been banned since 2021 when the Central Bank of the Republic of Turkey prohibited “any direct or indirect usage of crypto assets in payment services and electronic money issuance.” Nevertheless, crypto adoption in Turkey is still evident, with an increasing number of Turkish banks offering crypto services and shops and ATMs providing crypto exchange options.

High inflation rates backed the erosion of the Turkish lira’s value, which lost nearly 60% of its purchasing power as inflation soared to 85.5% between 2021 and 2023. This led many Turkish citizens to turn to Bitcoin as a store of value and a medium of exchange.

While some argue that Bitcoin’s scarcity bodes well for long-term appreciation, potentially outpacing consumer inflation, its high volatility and recurring correlation with tech-heavy, risk-associated indexes like the Nasdaq in recent times suggest that its performance as a pure inflation hedge remains mixed.

However, in inflation-ridden nations like Argentina and Turkey, where local currencies have collapsed in value, the “digital gold” has undeniably served as a crucial avenue of escape from local currencies, preserving purchasing power in ways traditional fiat cannot.

Although Bitcoin is still a nascent asset, and its effectiveness as a hedge requires further study, one thing remains clear—so far, it has significantly outperformed consumer inflation. For Bitcoin enthusiasts, that alone is reason enough to celebrate.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

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‘Significant’ number of countries to provide troops to Ukraine peacekeeping force

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'Significant' number of countries to provide troops to Ukraine peacekeeping force

A “significant number” of countries will provide troops to a Ukraine peacekeeping force, Sir Keir Starmer’s spokesman said.

On Saturday, leaders from 26 Western countries – plus two EU leaders and NATO’s secretary general – gathered for a virtual call of the “coalition of the willing”, hosted by Sir Keir after Volodymyr Zelenskyy accepted a 30-day interim ceasefire agreement.

Politics latest: Farage welcomes defectors

The prime minister said military chiefs would meet this Thursday to discuss the next “operational phase” in protecting Ukraine as part of a peacekeeping force – if a deal can be agreed with Russia.

Speaking on Monday, Sir Keir’s spokesman said they now expect “more than 30” countries to be involved in the coalition – but did not reveal which other countries had joined since Saturday.

He added: “The contribution capabilities will vary, but this will be a significant force, with a significant number of countries providing troops and a larger group contributing in other ways.”

The spokesman did not say which countries agreed to be part of a peacekeeping force, which Sir Keir and French leader Emmanuel Macron have confirmed the UK and France will be part of.

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What could a peacekeeping force actually do?

Could troops end up fighting?

Russia has repeatedly said it would not accept soldiers from NATO countries being stationed in Ukraine.

Asked if British troops fired on by Russia in Ukraine would be allowed to fire back, the spokesman said: “It’s worth remembering that Russia didn’t ask Ukraine when it deployed troops.

“We’ve got operational planning meetings that they are going through.”

The spokesman also said he did not know if the US – notably absent from the coalition – will be joining the military chiefs’ meeting on Thursday, but said the UK is having “regular discussions with our American counterparts”.

Both the UK and France are pushing for the US to provide security guarantees to prevent Russia from reneging on any peace deal with Ukraine.

Read more:
Who’s in the coalition of the willing?

Follow live updates from the Ukraine war

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Which nations will join peacekeeping efforts?

Trump and Putin to hold talks

Last week, Russian President Vladimir Putin said he supports the truce brokered by the US in Saudi Arabia, but “lots of questions” remain over the proposals.

Donald Trump said on Sunday night he will speak to Mr Putin on Tuesday about ending the war and negotiators have already discussed “dividing up certain assets”, including land and power plants.

He said a “lot of work” had been done over the weekend on a peace deal.

The leaders involved in Saturday’s call were from: Australia, Belgium, Bulgaria, Canada, Czech Republic, Denmark, Finland, France, Germany, Greece, Iceland, Italy, Latvia, Lithuania, Luxembourg, Netherlands, New Zealand, Norway, Poland, Portugal, Romania, Spain, Sweden, Turkey, Ukraine, and the UK.

NATO Secretary General Mark Rutte, EU Commission President Ursula von der Leyen and EU Council President Antonio Costa also joined.

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A Labour Party in Tory clothing? Why Starmer’s backbenchers are deeply uncomfortable

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A Labour Party in Tory clothing? Why Starmer's backbenchers are deeply uncomfortable

Since taking office nine months ago Sir Keir Starmer has weathered party rows about winter fuel payments, the two child benefit cap, WASPI women, airport expansion and cuts to international aid.

All of these decisions have been justified in the name of balancing the books – filling that notorious £22bn black hole, sticking to the fiscal rules, and in the pursuit of growth as the government’s number one priority.

But welfare reform feels like a far more existential row.

Health Secretary Wes Streeting argued on Sunday Morning With Trevor Phillips that the current system is “unsustainable”.

Ministers have been making the point for weeks that the health benefits bill for working-age people has ballooned by £20bn since the pandemic and is set to grow by another £18bn over the next five years, to £70bn.

But the detail of where those cuts could fall is proving highly divisive.

One proposal reportedly under consideration has been to freeze personal independence payments (PIPs) next year, rather than uprating them in line with inflation.

Charities have warned this would be a catastrophic real-terms cut to 3.6 million people.

Concerned left-wing backbenchers are calling on the government to tax the rich, not take from the most vulnerable.

The Sunday Times and Observer have now reported that Work and Pensions Secretary Liz Kendall has dropped the idea in response to the backlash.

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Streeting defends PM’s comments on ‘flabby’ public sector

Read more:
Streeting denies Labour ‘changing into Tories’
Planned PIP freeze set to be scrapped – reports
What cuts could be announced?

Wes Streeting denied reports of a cabinet row over the plan, insisting the final package of measures hasn’t yet been published and he and his cabinet colleagues haven’t seen it.

Not the final version perhaps – but given all backbench Labour MPs who were summoned to meetings with the Number 10 policy teams for briefings this week, that response is perhaps more than a little disingenuous.

In his interview with Sir Trevor Phillips, he went on to make the broader case for PIP reform – highlighting the thousand people who sign up to the benefit every day and arguing that the system needs to be “sustainable”, to “deliver for those that need it most” and “provide the right kind of support for the different types of need that exist”.

To me this signals the government are preparing to unveil a tighter set of PIP eligibility criteria, with a refocus on supporting those with the greatest needs.

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Liz Bates: Will there be a backlash over benefits?

Changes to incapacity benefit to better incentivise working – for those who can – are also clearly on the cards.

The health secretary has been hitting out at the “overdiagnosis” of mental health conditions, arguing that “going out to work is better for your mental and physical health, than being spent and being stuck at home”, and promising benefit reforms that will help support people back to work rather than “trapped in the benefits system”.

Turning Tory?

Starmer said this week the current welfare system couldn’t be defended on economic or moral grounds.

The Conservatives don’t disagree.

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Conservatives: Scrapping NHS England is ‘right thing’

Before the election, they proposed £12bn in cuts to the welfare bill, with a focus on getting people on long-term sickness back to work.

This morning, shadow education secretary Laura Trott claimed Labour denied that welfare cuts were needed during the election campaign and had wasted time in failing to include benefits reform in the King’s Speech.

“They’re coming to this chaotically, too late and without a plan,” she said.

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Notwithstanding the obvious critique that the Tories had 14 years to get a grip on the situation – what’s most striking here is that, yet again, the Labour government seems to be borrowing Conservative clothes.

When challenged by Sir Trevor this morning, Streeting denied they were turning Tory – claiming the case for welfare reform and supporting people into work is a Labour argument.

But, from increasing defence spending and cutting the aid budget to scrapping NHS England, there’s a definite pattern emerging.

If you didn’t know a Labour administration was in charge, you might have assumed these were the policies of a Conservative government.

It’s a strategy which makes many of his own backbenchers deeply uncomfortable.

But it’s doing a good job of neutering the Tory opposition.

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Sky News and Politico join forces again with new Politics At Sam And Anne’s podcast

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Sky News and Politico join forces again with new Politics At Sam And Anne's podcast

The new Sky News and Politico podcast Politics At Sam And Anne’s launches today, with Anne McElvoy replacing Jack Blanchard as Sam Coates’s co-host.

The political podcast will be available from 7.30am Monday to Thursday and will see Coates, Sky News’ deputy political editor, and McElvoy, Politico’s executive editor, unpack everything there is to know about the day ahead in Westminster.

Each instalment of the award-winning podcast will give audiences the latest insight into British politics in no more than 20 minutes.

The podcast originally launched in September 2023 with Jack Blanchard – Politico’s former UK editor, and now author of Politico’s DC Playbook.

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McElvoy’s arrival comes after a successful year for the podcast as it was recently recognised at the inaugural Political Podcast Awards and credited for its “must-know political insight”.

Coates, who won Presenter of the Year at the 2025 Political Podcast Awards, said: “Having Anne on board as my new full-time co-host is hugely exciting.

“With her phenomenal multi-decade background in domestic and international affairs, Anne is best in class at dissecting how events around the world are shaping Westminster.

“By combining Politico’s incredible depth and Sky’s ability to cut through the noise, we are well placed to continue providing unrivalled analysis and the latest scoops to our informed Westminster audience.”

McElvoy said: “Sam’s boundless energy, deep cross-party knowledge and a shared delight in informed conversation on the topics and characters shaping politics make even our early morning recordings fun.

“Our mission remains delivering the unmissable first podcast of the day for and about Westminster. We will explore the news moments that matter, offer our own insights and spontaneous exchanges and preview events that shape our political world.”

David Rhodes, executive chairman of Sky News, said the podcast was “the go-to source for people who work in Westminster and beyond”.

He said: “It provides an unparalleled service, giving a community of highly engaged listeners the full story, first each morning on what’s happening in politics.”

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