Cryptocurrency as an alternative inflation hedge?

We examine the association of Bitcoin, and other cryptocurrency, returns with changes in inflation expectations, and form a comparison with gold, a traditional inflation hedge. We control for uncertainty in economic policy, cryptocurrency, and financial markets, and show that cryptocurrency returns...

Full description

Saved in:
Bibliographic Details
Published in:Accounting and finance (Parkville) 2024-06, Vol.64 (2), p.1589-1611
Main Author: Smales, L. A.
Format: Article
Language:English
Subjects:
Bitcoin
breakeven inflation rate
cryptocurrency
gold
inflation expectations
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:We examine the association of Bitcoin, and other cryptocurrency, returns with changes in inflation expectations, and form a comparison with gold, a traditional inflation hedge. We control for uncertainty in economic policy, cryptocurrency, and financial markets, and show that cryptocurrency returns are positively related to changes in US inflation expectations only for a limited set of circumstances. 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% (the Fed's inflation target). Moreover, cryptocurrency returns tend to be lower on days with monthly consumer price index (CPI) announcements and respond negatively to CPI surprises. Our results suggest that cryptocurrencies do not currently offer investors a viable alternative to gold for hedging inflation.
ISSN:0810-5391
1467-629X
DOI:10.1111/acfi.13193