How Bitcoin Protects Wealth in an Age of Rising Inflation

How Bitcoin Can Hedge Against Inflation

• The world has been experiencing higher-than-average inflation for several years, even after the peak seen during the COVID-19 pandemic

• Inflation worsens economic inequality because it disproportionately impacts middle and low-income communities.

• Due to its deflationary nature, Bitcoin presents a promising solution to help mitigate the negative effects of inflation and lessen economic inequality.

Inflation’s Impact on the United States

Over the past few years, inflation has become a defining economic challenge across North America. While the peak levels of inflation seen during 2022 and 2023 have cooled somewhat, prices remain stubbornly high as essentials like food, housing, and transportation continue to rise at rates that outpace wage growth for many households.

In the U.S. inflation rates have been steadily declining but remain above central bank target of about 2%. The U.S. has not seen inflation that low since before the pandemic. Between 2020 and 2025, average consumer goods prices increased by 24.6%, nearly double the rate seen in the eight years before the pandemic.

Why Has There Been Higher-Than-Average Inflation?

Inflation happens when the money supply grows faster than a country’s economic output, which is exactly what happened in 2020 with the response to the COVID-19 pandemic. For several months, the economy was brought to a halt, with businesses forced to close their doors, leading to low levels of production. However, consumers continued to spend money on increasingly rare items. The rule of supply and demand took over and prices went up.

To relieve some of the financial burdens of the economic shutdown, the U.S. printed an unprecedented amount of new dollars to fund economic stimulus packages. As a result, the United States money supply grew by 30% from 2020 to 2025. This was the fastest money supply growth the United States had ever seen. Typically, year-over-year money supply growth sits at 3-7%.

Inflation Inequality

The wealthier members of society generally can leverage their assets to pay their expenses, and oftentimes asset values rise with inflation, blunting the harm of general price increases. This is a pressing issue in the United States: the top 10% control 71% of the country’s total wealth.

In the U.S. and Canada, these disparities increased throughout the pandemic years, partially due to the higher-than-average inflation that pushed low-wage earners over the line to poverty. Bitcoin and other cryptocurrencies present a promising solution for helping to hedge against the effects of inflation and may be a useful tool for middle and low-income families to preserve their wealth. Before we get into how Bitcoin can help during times of high inflation and economic inequality, let’s look into the current state of inflation in North American economies.

Traditional Hedges Against Inflation

Before Bitcoin and other digital assets entered the picture, investors traditionally relied on a set of well-established hedges to protect their wealth from inflation.

Gold has long been considered the most reliable store of value, prized for its scarcity and historical resilience during economic downturns. However, it lacks portability, is not easily divisible and presents security and storage challenges.

Real estate is another popular hedge, as property values and rental income typically rise with inflation, but it requires substantial capital and it involves maintenance and liquidity risks.

Treasury Inflation-Protected Securities (TIPS) offer government-backed protection by adjusting their principal value based on inflation indexes, yet they provide relatively low returns and are subject to interest rate risk.

Additionally, investing in stocks—particularly those tied to essential goods and services—can serve as a partial inflation buffer, as companies often pass increased costs onto consumers. However, equities remain susceptible to market volatility and economic downturns.

While these traditional options offer varying degrees of protection, they are not always accessible or effective for everyone, especially those without significant capital or financial knowledge.

Bitcoin as a Potential Hedge

Bitcoin was designed to counteract the inflationary flaws inherent in centralized currency systems. It features a fixed supply of 21 million coins, in stark contrast to the unlimited printing potential of fiat currencies.

This scarcity is reinforced by a predictable monetary policy: a "halving" occurs approximately every four years, cutting miner rewards by 50% and gradually reducing new supply. These halving events offer transparency and long-term predictability in issuance. This gradual reduction in new supply mimics scarcity and is intended to increase Bitcoin's value over time as it becomes harder to obtain. Learn more about halving events on our blog.

Bitcoin is also decentralized, meaning no government or central bank can manipulate its supply or monetary rules.

Finally, Bitcoin benefits from digital portability: unlike gold or real estate, it can be transferred and stored globally with ease, making it accessible to anyone with internet access.

The combination of all these attributes make Bitcoin a useful alternative to traditional hedges against inflation and has earned it the nickname "digital gold."

Bitcoin’s Recent Performance

Between 2020 and early 2025, Bitcoin's value skyrocketed from about $7,000 in 2020 to reaching all-time highs above $120,000 in 2025. This surge has been driven by rising institutional adoption, global economic uncertainty, and an increasing distrust in traditional financial systems. Bitcoin’s deflationary nature means that over time, its purchasing power is expected to grow, while fiat currencies lose value.

It's important to recognize Bitcoin's volatility. While it can serve as a store of value and an inflation hedge for long-term investors, price fluctuations mean investors looking for short-term gains take on a lot more risk. However, this volatility is not unique to Bitcoin as even stocks can be volatile. Investing in Bitcoin shouldn’t be seen as a standalone solution for hedging against inflation and should be used alongside other traditional methods.  To learn more about cryptocurrency volatility, you can find more information on our blog.

Broader Access and Inclusion

Financial inclusion has become a central theme in Bitcoin's evolution. In countries plagued by hyperinflation such as Argentina, Venezuela, and Turkey, Bitcoin adoption has surged as residents seek to preserve the value of their savings amidst collapsing national currencies.

In Argentina, citizens turned to Bitcoin as an alternative to the peso, which continues to lose purchasing power at an alarming rate. In Venezuela, where hyperinflation devastated the economy, Bitcoin provides a rare store of value and a means of international trade. In Turkey, citizens increasingly use Bitcoin to protect against the lira's steep depreciation. This grassroots adoption reflects a broader trend where individuals turn to decentralized digital currencies to escape the failures of monetary policy and inflationary pressures.

Bitcoin enables anyone with a smartphone and internet connection to download a wallet, purchase coins, and transact globally without needing a bank account. Cross-border transfers become cheaper and faster, offering a significant advantage for migrant workers and families that depend on remittances.

Evolving Regulatory Landscape

In 2025, regulatory frameworks have matured significantly. The United States has introduced both the Digital Asset Stability and Security Act and the newly passed GENIUS Act (Generating Effective National Infrastructure for Ubiquitous Security). While the former focuses on consumer protections and compliance clarity for digital assets, the GENIUS Act aims to create a national infrastructure that supports secure, regulated innovation in blockchain and crypto technologies. Canada has also tightened regulations around stablecoins and cryptocurrency exchanges. These measures lend legitimacy to Bitcoin and cryptocurrencies at large while introducing important new compliance requirements for users and businesses.

Risks and Caveats

While Bitcoin offers potential as an inflation hedge and tool for financial inclusion, it is not without its challenges. Regulatory uncertainties remain a significant risk as governments could impose restrictions or introduce new taxation policies that affect access and usability.

There is also a pronounced education gap: many people still lack the technical understanding or digital infrastructure needed to use Bitcoin safely and effectively. Furthermore, Bitcoin is a relatively young and evolving asset class, which means it continues to face issues related to volatility, scalability, and institutional trust. These risks should be carefully weighed when considering Bitcoin as part of any financial strategy.

Final Thoughts

Even as headline inflation moderates, the financial strain on everyday people remains significant. Economic inequality continues to widen, driven by wage stagnation and the unequal burden of inflation. Bitcoin offers a compelling alternative for those seeking to hedge against fiat currency depreciation and for those historically excluded from traditional banking.

While Bitcoin is not a guaranteed solution and comes with its own risks, it represents a powerful tool for preserving wealth and promoting financial inclusion. With continued education, thoughtful adoption, and balanced regulation, Bitcoin can help individuals build more resilient financial futures in an uncertain economic landscape.

Financial Advice Disclaimer: Nothing in this article constitutes professional or financial advice, performance data or any recommendation that any specific cryptocurrency, portfolio, index, investment product, transaction or investment strategy is suitable for any specific person. You assume the sole responsibility of evaluating the merits and risks associated with all financial decisions and should seek the advice of a registered financial advisor when in doubt.