Is Bitcoin Still a Reliable Hedge Against Inflation in 2025?

For one thing, businesses, entrepreneurs, and investors started using Bitcoin as a novel hedge against inflation, almost like gold — another asset that’s become more precious in its name and equity than market price. Even if a company runs out of budget, it still has this scarce, much sought-after currency that can be used for business-saving sale or investment.

In the year 2025, however, with all the global economic volatility and hardships, as well as Bitcoin gradually reaching its cap limit, we’re all interested in one question — can we still use it that way? Is Bitcoin a hedge against inflation in the new harsh realities of the now?

Let’s figure it out.

Global Inflation Trends: Where Are We Now?

Against all odds, global inflation seems to be easing in 2025. New U.S. tariffs in April surely injected some short-term chaos and panic, reflecting in overall international market instability. Still, according to the IMF’s January 2025 update, global headline inflation is forecast to decline from 4.3% in 2024 to 4.2% in 2025 (and further down to 3.6% in 2026). 

That is mostly due to energy prices cooling down by a bit and supply-chain disruptions receding, with most businesses getting back on track with their suppliers after the shock of Trump’s tariffs and whatnot. Another chart by the IMF shows that advanced economies are expected to converge to central-bank targets (around 2.5%), while emerging markets may stabilize near 5.5%. 

Other than that, OECD data show headline inflation in its member countries eased to 4.2% in March 2025, down from 4.5% in February. This disinflation backdrop is what stimulated institutions to make radical central-bank-focused decisions and investors to rush their assets into inflation-protected securities*.

*Treasury Inflation-Protected Securities, or TIPS, are types of bonds that allow investors to offset the mass effects on inflation by making investments in securities with the adjusted principal value. TIPS help maintain investment portfolios and keep above the water with over-time returns even in harsh inflationary conditions.

As such, if not a full-on alternative for TIPS, Bitcoin comes in as an additional backing asset with an overtime persistent and potentially recurring value. However, with the inflation situation in hand, it is crucial to investigate another side of the story, namely the inflationary impact on cryptocurrency. 

Bitcoin Price vs. Inflation: 2020-2025 Correlation Analysis

Understanding inflation across its global facets is only one part of the equation. Then, there’s also Bitcoin, with its own “crypto economy”, if we may. And the latest events have only proven that this economy is quite sensitively affected by macroeconomic volatilities and external inflation of the world economies. 

So, does Bitcoin really work as that saving grace in times of far-reaching inflationary challenges? Well, sometimes. If we look at some academic research, we can see that Bitcoin’s correlation coefficient (R²) with CPI changes at 0.27 over the past five years, which shows us a very important tendency: only 27% of Bitcoin’s price dynamics (i.e., spikes and drops) tend to match inflation events and surprises. 

A noteworthy example of the crypto actually not saving the day is when during the 2021 CPI surge to 9% Bitcoin fell over 35%, decoupling from rising prices. But that happened over four years ago when the sentiment for “underregulated cryptocurrencies still being risky” was still reigning supreme. 

Since then, trust in Bitcoin and other cryptos has grown hundredfold. Thus, forward-looking inflation expectations (e.g., 5-year breakeven rates) have shown a tighter positive correlation with Bitcoin rallies, which suggests that Bitcoin responds to anticipated inflation more than realized CPI.

It is also important to note that Bitcoin retains its hedge potential mostly thanks to its fixed supply and scarcity, the latter being maintained by halving. Every three-four years, the number of total bitcoins generated by the network is reduced — see Bitcoin halving explained for more details.

All of that gives us more hope for avoiding the eventual coin inflation, and Bitcoin remaining a hedge against inflation. But let’s dig deeper, shall we?

2025: Bitcoin’s Response to New U.S. Tariffs and Inflation Fears

More in-between effects of Bitcoin and global inflation can be seen when we put under the microscope exactly how the network reacted to new extreme tariffs and other economic intimidation in practice. In chronological order, here’s what we have:

Tariff announcement by Trump in April 2025

On April 2, 2025, the U.S. President Donald Trump imposed a 10% baseline tariff on most country-wide imports, followed by 125% reciprocal tariffs on Chinese goods. This sent waves of unexpected fluctuations in economies across the globe, with hardware costs rising sharply and macro volatility sparking out of nowhere.

Short-term volatility vs. long-term narrative

Shortly after the tariffs were announced and came into effect, the price for Bitcoin plunged 12% — falling from $105,000 to $92,000. But it then started quickly rebounding, however, because markets started pricing in possible tariff carve-outs (e.g., for certain types of electronics). Other possibilities to actually weather the tariff storm appeared as well.

In reality, the most tangible real-world effects that we all experienced were panic and uncertainty immediately after the tariffs’ announcement. But life went on, and Bitcoin remained as demanded as ever. 

Bounce-back

Within two weeks, Bitcoin recovered half its losses. This shows how much investors believe in its blockchain explained framework and decentralized nature as an inflation hedge with a multi-year potential.

Bitcoin’s tariff-responsive spike highlighted this currency’s crucial role as a speculative asset in the short run, even as long-term holders emphasize its halving-driven scarcity (with the next bitcoin halving slated for 2028).

Institutional Investors: Still Trusting Bitcoin as a Hedge?

What do we have now, a good while after the tariffs happened? Major allocators of funds and assets, including sovereign wealth funds and pension plans, have continued to add Bitcoin to portfolios. It is basically viewed alongside gold, and is considered as the possible new type of inflation-protected securities that will actually help diversify economies. 

Referring once more to Fidelity’s recent report, we found that while Bitcoin’s correlation to equities rose, its long-term return profile still outpaces inflation-linked bonds over rolling five-year periods. It is still a risk asset, but a very promising and enticing one.

However, economy-shaping players exercise caution: many institutions cap Bitcoin allocations at 1–3% of total AUM. This tells us that they are both convinced of Bitcoin’s potential as a hedge against inflation and concerned about its regulatory obstacles.

The Role of Central Bank Policies and CBDCs

In order to timely tame the inflation, the Federal Reserve and the European Central Bank (ECB) introduced aggressive rate hikes. On the flip side, those hikes weighed on risk assets like Bitcoin. Meanwhile, launches of pilot central bank digital currencies (CBDCs) in China and Europe offer consumers digital money with lower volatility. 

This novelty can narrow Bitcoin’s unique appeal as a digital alternative. Ultimately, as CBDCs promise stability, Bitcoin must double down on scarcity (fixed 21 million supply). This way, it should be able to maintain its hedge argument.

Bitcoin in Emerging Markets: Inflation Shield or Volatility Trap?

In nations like Turkey and Argentina — where local inflation nears 50% and consumer prices surging — Bitcoin wallet activations jumped over 28%, probably due to citizens seeking inflation-resistant stores of value. On the other hand, Bitcoin’s 60% annualized volatility can deepen losses for unhedged holders during crypto bear markets. For them, the seeming inflation shield of crypto can turn into a volatility trap. 

In light of that, micro-hedging strategies have emerged, e.g., using perpetual futures or options to stabilize returns. But these require complex knowledge and are usually carried out by the highest-level investors. Retail users can only get limited access to micro-hedging tools, so it is important to know your stuff.  

Why Bitcoin’s Hedge Narrative Is Being Questioned?

To sum up, there are a bunch of reasons why people start questioning the reliability, even future possibility of Bitcoin acting as a hedge to shield one from the inflation. From dry figures and statistics to more in-depth analyses and tendencies, here’s what we have:

• Correlation weakness: Low R² with realized CPI in high-inflation periods does not speak in favor of Bitcoin as a counter-inflation hedge, demonstrating unexpected backward dips in price along with inflationary pits. But the coin will still retain its value and usefulness as a funds-backing asset, due to its pure authority.

• Regulatory risks: Potential crypto-specific tariffs and AML rules could constrain investment and financial flows of Bitcoin hedgers. You do need to be prepared in the face of upcoming regulations, like the EU AI Act and others, to keep your Bitcoin hedge viable.

• Alternative assets: Specialized CBDCs and indexed bonds are out there and they offer more predictable inflation protection. Bitcoin cannot live up to their efficiency, but it doesn’t really have to, remaining a fitting auxiliary digital asset.

• Behavioral factors: Bitcoin often fluctuates with risk appetite, not purely as a hedge against inflation. To be leveraged efficiently long-term, it requires a well-informed, knowledgeable approach, both technically and business-wise.

Bitcoin can still be used as a working hedge against inflation, but only with proper knowledge, tools, and professional assistance in hand. There are still risks and emerging realities waiting to happen. So it’s all the more exciting to see where it all takes us. 

If you need more info on Bitcoin’s counter-inflationary potential, you can get Bitcoin explained in our blog or contact us directly for a consultation and estimation of your new crypto farm.