Bitcoin two years after the inflation wave, how good of a hedge is it?

And why inflation is not debasement

The Bitcoin ETFs are attracting a decent amount of money. At least they are definitely hotter than gold. And one of the reasons those two are getting compared is that they share a similar thesis.

Bitcoin like gold is thought of as a store of value. That is an asset whose value is resistant to the debasement of fiat money.

And while debasement and inflation aren't exactly the same thing, many investors are betting on Bitcoin doing better than inflation over the long run.

The post-COVID inflation wave has been with us for 4 years. So now is a good time to stop and check how well Bitcoin performed in terms of real returns.

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Bitcoin two years after the inflation wave, how good of a hedge is it?

The takeaway

Bitcoin is a good hedge against debasement. But it is not a very good hedge against inflation over the short term.

If you take a long term view then Bitcoin's growth driven by its adoption is likely to more than compensate for inflation. 

This observation is not specific to Bitcoin. Financial assets that are not directly linked to the cause of an inflation spike aren't going to be perfect hedges. 

If you are really in need of a short term tactical position to hedge against inflation, look towards assets tied to commodities.

Bitcoin, inflation and debasement