Bitcoin Fails as Inflation Hedge, Tracks Dollar Weakness
NYDIG research finds bitcoin isn’t a reliable inflation hedge, showing weak and inconsistent correlation with CPI and PPI. This challenges bitcoin’s role as an inflation hedge and highlights its evolution into a liquidity barometer that closely tracks US dollar movements and monetary policy. A falling dollar index and lower real interest rates tend to boost bitcoin, mirroring gold’s behavior during periods of easing monetary conditions. As bitcoin integrates further into traditional finance, its negative correlation with the dollar and sensitivity to money supply expansions are expected to strengthen. Traders should monitor dollar index trends, interest rate changes, and global liquidity to gauge bitcoin’s price movements.
Bullish
The report’s findings that bitcoin responds more to dollar weakness, lower real rates, and expanded money supply point to a supportive macro environment. In the short term, shifts in the dollar index and central bank policy are likely to drive volatility and upside momentum for bitcoin. Over the long term, continued monetary easing and deeper integration with traditional finance should reinforce bitcoin’s liquidity-driven rally, making its outlook broadly bullish.