Abstract
We examine the association of Bitcoin, and other cryptocurrency, returns with changes in inflation expectations, forming a comparison with gold, a traditional inflation hedge. We show that returns of cryptocurrency, and gold, are positively related to changes in US inflation expectations. This relationship holds after controlling for uncertainty in economic policy and financial markets. However, unlike with gold, the identified relationship is only significant for short-term inflation expectations, and when market-implied expectations or PCE are below 2%. Our results suggest that cryptocurrencies could offer an alternative to gold in hedging inflation only in limited circumstances.
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