NYDIG Analysis Challenges Bitcoin Inflation Hedge Narrative as Dollar Weakness Emerges as Key Driver

According to Cointelegraph, NYDIG global head of research Greg Cipolaro released a report on Friday stating that Bitcoin is not a strong inflation hedge. The data does not support the widespread belief that Bitcoin protects against inflation. Cipolaro noted that correlations between Bitcoin and inflationary measures are neither consistent nor particularly high. Bitcoin tends to rise when the US dollar weakens rather than when inflation increases.

The NYDIG research examined Bitcoin's price behavior relative to multiple macroeconomic indicators. Cipolaro found that expectations of inflation serve as a better indicator for Bitcoin than actual inflation data. However, even inflation expectations show relatively weak correlation with Bitcoin price movements. The report contrasts sharply with the long-standing narrative promoted by Bitcoin supporters who describe the asset as "digital gold."

Cipolaro identified interest rates and money supply as the two major macroeconomic factors affecting Bitcoin. The relationship between global monetary policy and Bitcoin has been persistently positive and strong over the years. Looser monetary policies typically benefit Bitcoin price performance.

Why This Matters

The NYDIG findings directly challenge a core investment thesis used to justify Bitcoin allocation in portfolios. Many institutional investors and retail buyers purchased Bitcoin specifically as protection against currency debasement and rising consumer prices. The research shows this strategy may be fundamentally flawed.

Crypto Valley Journal reports that correlation coefficients between Bitcoin and the US Dollar Index ranged between negative 0.3 and negative 0.6 from 2020 to 2025. This inverse relationship means Bitcoin typically rises when the dollar falls against other major currencies. Bitcoin-specific factors like the 2024 halving and ETF approvals can sometimes override dollar influences in the short term.

We reported that institutional Bitcoin adoption accelerated in 2025 with ETFs accumulating over $65 billion in assets by April. BlackRock's iShares Bitcoin Trust alone attracted over $18 billion. These institutional investors need accurate frameworks for understanding Bitcoin's price drivers to justify continued capital allocation.

Industry Implications

The NYDIG research reframes Bitcoin's role in the global financial system. Cipolaro states that Bitcoin has evolved into a liquidity barometer rather than an inflation protection asset. This characterization aligns Bitcoin more closely with risk assets that respond to central bank policies and credit conditions.

Gold also shows inconsistent performance as an inflation hedge according to the NYDIG analysis. The research found gold has an inverse correlation with inflation across different time periods. Both Bitcoin and gold demonstrate stronger relationships with dollar movements and interest rate changes than with inflation itself.

The findings suggest Bitcoin's integration into traditional financial markets will strengthen its inverse correlation with the dollar over time. NYDIG expects this relationship to grow as Bitcoin becomes more embedded in the global financial ecosystem. This development could reduce Bitcoin's utility for investors seeking assets uncorrelated with traditional markets.

The analysis has direct implications for portfolio construction strategies. Asset allocators who included Bitcoin as an inflation hedge may need to reconsider their position sizing and risk management approaches. The research indicates Bitcoin functions more effectively as a bet on loose monetary policy and dollar weakness than as protection against rising consumer prices.