Over the past four years, people around the globe have faced persistent inflation and have seen their purchasing power erode. Globally, this inflation rate peaked in 2022(nuova finestra) at 8.6%, the highest rate since 1996. This has had profound impacts at the grocery store(nuova finestra), gas pump(nuova finestra), and the ballot box(nuova finestra). This has driven people to find a way to protect themselves and their investments against monetary devaluation.
Bitcoin has become known as an effective hedge against inflation thanks to its unique properties that resist inflationary pressures. But what exactly is inflation, and does Bitcoin stand out as a potential safeguard? This article explores the relationship between Bitcoin and inflation.
What is inflation?
Inflation refers to a broad increase in the price of goods over the long term. Typically, the root of inflation is caused by an increase in money supply that weakens the strength of that currency, causing the nominal price of goods to increase. If you’ve ever seen old newspapers that sold for a quarter or old signs that advertised bottles of Coca-Cola for a nickel, you’ve seen how much inflation can affect prices over the years.
Many economists believe a small amount of inflation is helpful to grow the economy since it acts as a mild incentive to encourage people to spend their money before it loses value. The US Federal Reserve(nuova finestra), which controls the US’s monetary policy, and the European Central Bank(nuova finestra), which controls the euro supply, have an annual inflation target of 2%. (As of February 2025, inflation rates in the US (nuova finestra)remained roughly 2.8%.) To hit this target, these institutions typically introduce progressively more currency into their respective economies.
Nearly every central bank has a similar inflation target, meaning nearly every major currency is subject to persistent inflation. And this is the best-case scenario. Some countries, either due to political instability or economic mismanagement, face what’s called hyperinflation. Argentina, Lebanon, Venezuela, and Zimbabwe(nuova finestra) suffered inflation rates of over 100% in 2023, meaning their currencies were worth less than half what they were at the beginning of the year.
Why does this matter to you? Because if you’re trying to save money, inflation will reduce its value. This is what makes finding low-risk investments that can act as a hedge against inflation so tricky — and so valuable.
Why should Bitcoin be a good hedge against inflation?
Inflation was one of the major concerns of Satoshi Nakamoto, the pseudonymous founder of Bitcoin. In the announcement post for Bitcoin, he wrote about how central banks have consistently “debased” (devalued) currencies, and he addressed many questions on how to create a currency that retains its value.
That’s why he designed Bitcoin to intentionally be scarce, unlike other currencies. There can never be more than 21 million BTC, and the rate at which BTC can be mined is cut in half (the so-called “Halvening”) every four years. This means there is a limited, known amount of BTC that can ever exist and that these coins are introduced into the market in a known, expected way. Additionally, Bitcoin runs on a decentralized network, largely managed by everyday people. This means no one can “devalue” or create more BTC unilaterally, nor is there any central authority that governments can pressure.
Bitcoin’s built-in scarcity, decentralization, and real-world applications (such as allowing you to send large amounts of money internationally without relying on the banking system or third parties that can monitor or halt your transaction) have meant that BTC’s value has traditionally increased. While there has been volatility and downturns, Bitcoin’s overall trend has been positive, from essentially worthless upon its introduction in 2009 to over $100,000(nuova finestra) in December 2024 (this is not investment advice).
Does Bitcoin experience inflation?
Bitcoin does currently experience some inflation simply because new coins are continuously being mined. But, unlike fiat currencies, Bitcoin’s annual inflation rate (the amount of new coins added to the system) is hard-coded and cannot be changed or manipulated by governments. Thanks to the halving, the number of coins added by mining is cut in half every four years, meaning the inflationary pressures will progressively diminish(nuova finestra) until the last coin is mined (projected to be sometime in 2140). Bitcoin advocates point out that, by some measures, Bitcoin’s inflation rate dipped below gold’s(nuova finestra) after the 2024 halvening.
Any change to Bitcoin’s supply limit or inflation rate would require a majority of the millions of people who run nodes of the Bitcoin network, all of whom are financially motivated to protect Bitcoin’s long-term value. This makes Bitcoin’s inflationary pressures different from those that affect fiat currencies.
Once the last BTC is mined, Bitcoin will have a stable amount of coins and not face any inflationary pressure.
Is Bitcoin a good inflation hedge?
At the moment, it’s hard to be definitive. Even the most ardent Bitcoin defender will admit its value is incredibly volatile, which is not ideal for a currency or hedge against inflation. To paraphrase one investment advisor(nuova finestra), Bitcoin is supposed to be a currency, taxed like a property, and often compared to commodities.
So, an optimistic reading is that while Bitcoin hasn’t yet proven to be a consistent hedge against inflation, it is an asset with a strong trend of increasing value. Furthermore, as regulatory clarity make Bitcoin easier to use, it seems likely more people and institutional investors will shift their money to it as it has unique strengths as a method of storing value. Once BTC has reached its maximum global uptake, its price should stabilize, and its inherent anti-inflationary characteristics should become more manifest.
Additionally, Bitcoin provides an opportunity to anyone living in a country that doesn’t have a lot of strong investment options. If you live in Venezuela or Lebanon, you don’t have a strong local stock market where you can easily invest your money to stay ahead of inflation, and real estate is a longer-term, more illiquid investment. Given that anyone can buy or mine Bitcoin from anywhere, it presents people living in countries without a strong stock market and suffering from hyperinflation a unique way to protect value.
Protect against inflation with Bitcoin and Proton Wallet
As inflation reshapes economies and diminishes the value of fiat currencies, Bitcoin offers a compelling alternative for those seeking financial security. Its finite supply and decentralized nature make it a standout choice in the evolving global financial ecosystem. While Bitcoin is not without its complexities and risks, its potential as a hedge against inflation highlights its growing importance.
Proton Wallet makes it easy to transact with BTC while protecting your privacy. With Proton Wallet, you can access and transact with BTC from anywhere with an internet connection using our mobile apps and web app.
Our Bitcoin via Email feature lets you send BTC to anyone else with a Proton Wallet with just their email address — no more entering long, complicated Bitcoin addresses. And our Proton Sentinel advanced security program combines AI and human expertise to detect and block malicious account takeover attempts. This ensures your Bitcoin remains secure even in the face of sophisticated cyberattacks against your account.
In an era of economic uncertainty, Bitcoin offers financial independence and resilience through its limited supply, decentralized framework, and growing adoption. While still evolving, Bitcoin has the potential to be an effective hedge against inflation. It’s already a vital alternative for individuals in economically volatile regions. And Proton Wallet lets you easily manage and secure your BTC, allowing you to safeguard your wealth.
