Why is Bitcoin a hedge against inflation and currency debasement?

Bitcoin is often seen as a hedge against inflation – meaning it helps protect your money from losing value when prices go up. This is because only 21 million Bitcoins will ever exist—no more can be created. Bitcoin’s anonymous creator, Satoshi Nakamoto, set a limit of 21 million coins to keep it rare and valuable, helping protect against inflation.

If Bitcoin is a good hedge against inflation, which remains a concern, why has its price fallen recently? Bitcoin has been caught up in the broader decline and volatility of risk assets, hurting the S&P 500 and Nasdaq composite. The catalyst has been Trump’s announcement of tariffs and suspending aid to Ukraine. There is more to the equation, though, as tariffs are feared to hurt inflation in the long term. 

February’s softer-than-expected CPI print boosted rate cut expectations. The CME FedWatch Tool now shows increased odds of a rate cut in June, which, if realized, would see Bitcoin and equities move higher. This would push Bitcoin past $90K, reigniting bullish momentum despite the ongoing macro-driven volatility and trade policy uncertainty.

Bitcoin’s tradability around the clock without being restricted to working hours of banks and stock exchanges, as much as it adds to its benefit, also contributes to the volatility during market uncertainty. Another critical reason is that Bitcoin investors have another layer of sensitivity against industry-specific events and turmoils, such as Bybit’s recent exploit. However, as shown in the table below, its decentralized nature and fixed supply have helped it recover in the long run, as people become more aware of Bitcoin's proposition of a potential hedge against currency debasement and the fundamentals that allow it to achieve this. 

Bitcoin’s role as a risk-on asset and store of value remains evident amid shifting rate expectations. While short-term volatility persists, its fixed supply, decentralization, and liquidity strengthen its long-term appeal as an inflation hedge. As macro conditions evolve, Bitcoin’s resilience will be key for investors navigating uncertainty.