Inflation’s silent threat: Is crypto creeping in on traditional diversifiers’ turf?

Inflation’s silent threat: Is crypto creeping in on traditional diversifiers’ turf?

In today’s markets, uncertainty has become the new normal, putting pressure on traders and investors alike.

Changing tariffs, shifting monetary policies, and persistent tensions are weighing on sentiment and dampening global growth.

But beneath it all lies another enduring threat: inflation. Even as numbers improve, its effects continue to ripple through asset prices, investor behaviour, and risk perceptions.

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For traders and investors, this means that while inflation may no longer dominate headlines, its presence will still define the landscape.

Still shaping where capital flows, how portfolios are hedged, and which assets emerge as safe havens.

And this is why many are now asking: Could crypto be emerging as the next inflation hedge, challenging the long-standing dominance of traditional safe havens?

Cryptos as gold’s challenger

Safe havens tend to perform reasonably well during recessions, and for decades, gold has been the default refuge, an anchor during economic storms.

In recent years, bitcoin has emerged as its digital challenger, often described as “digital gold.” But that comparison might not be entirely grounded in reality. Let’s take a closer look.

On the surface, they seem alike, sharing certain traits: they are both scarce, speculative, and finite. Both are used in a limited capacity for transactions, influenced by demand, and dependent on third parties such as miners for supply. Yet, their behaviour tells a different story.

Although cryptocurrencies tend to behave similarly to traditional assets during inflation, i.e., lose value, they behave differently when policy uncertainty is added to the equation.

During past geopolitical instability, we have seen the market treat certain cryptocurrencies, like Bitcoin, as safe havens.

The reason behind this phenomenon is that cryptocurrencies are decoupled from government policy and currency manipulation, giving them an independent appeal during institutional mistrust.

This isn’t theoretical. Bitcoin rallied before and after the 2016 US elections, during the early stages of the COVID-19 pandemic, and at other global events when confidence in traditional systems wavered.

The question then isn’t whether bitcoin can move during uncertain times, but whether it can protect.

Is Bitcoin a Safe haven?

A study by Sangyup Choi and Junhyeok Shin of Yonsei University’s School of Economics found that while bitcoin tends to depreciate during periods of financial uncertainty, it rises in value during times of policy uncertainty, precisely because it operates independently of governments and central banks.

We are now in such a period, one defined by both geopolitical tensions and shifting trade policies. In these conditions, investors often diversify across assets that aren’t directly tied to fiscal or monetary decisions.

This is where bitcoin’s appeal lies: it represents freedom from institutional control, a self-contained system that functions outside the traditional policy loop.

Another study highlights the fact that it may be a strong hedge for oil, the US dollar, EU indices, and ETFs.

It also suggests that the correlation between gold, bitcoin, and US indices such as the S&P 500 and Nasdaq 100 may indicate that investors are also starting to view the cryptocurrency as a safe haven.

Still, there is an important caveat. Cryptocurrencies remain inherently volatile, and bitcoin’s short history means its safe-haven status is conditional, not guaranteed. Gold, by contrast, has earned its reputation over centuries.