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Bitcoin and inflation: what’s the story?
Feeling the pinch at the grocery store or gas pump? Prices are going up, but your dollar doesn't stretch as far. That’s inflation in action.
Simply put, inflation is the decrease in purchasing power of money over time.
Where does Bitcoin fit into the picture? Well, that’s what we’ll cover today. Read on to learn more about inflation, Bitcoin, other inflation hedges like gold, and much more.
Inflation is when your money buys less over time. Sucks, right?
Just take a look at the price of a cup of coffee. Back in 2004, you could get a cup of coffee for around $2.85* (data from usinflationcalculator.com). As of 2022, that same cup of joe might cost you $5.89* (data from the same source, usinflationcalculator.com),
Why does this happen?
Well, the U.S., and most other major countries, use what’s called a fiat money system. That means currency is government-backed, not supported by a physical commodity like gold.
Central banks can increase the money supply (a.k.a. printing money).
They do this for a variety of reasons, but mostly to influence the direction of the overall economy. When the supply of money increases, more is available for investors through commercial banks, which, in theory, stimulates the economy during rough periods.
Of course, it’s way more complicated than this, and many economists still don’t know what’s going on.
For now, just know that inflation happens when the purchasing power of money decreases.
Now for the Bitcoin and inflation story.
At the core of Bitcoin is an unchangeable rule: there will always and only be 21 million coins. Moreover, Bitcoin goes through what’s called “halving events.” Essentially, these reduce the amount of new coins issued by half, which increases the scarcity of newly created coins.
Now, compare this to fiat money, where the printers can be turned on at any time.
Essentially, you’re comparing a provably finite supply of coins against a potentially unlimited supply of fiat currency controlled by central banks.
There is no central bank of Bitcoin. It’s all decentralized, meaning no one is in control.
This “digital scarcity” is predictable, giving Bitcoin the nickname “digital gold.” That’s for a good reason, it shares plenty of qualities with gold (which you can explore in our blog post on Bitcoin vs. gold).
Many use this fact to support the idea that Bitcoin may hold its value over time.
In short, Bitcoin is seen as a potential inflation hedge.
Instead of losing its value over time, it only becomes more scarce. While more money gets pumped into circulation, the number of Bitcoins will always stay the same.
During inflationary times, investors often flock to these scarce assets, for example, gold.
Why gold? Well, much like Bitcoin, there is only so much gold on earth, meaning it’s scarce. Let’s see a quick comparison between the two:
While they certainly share some features, they’re not quite the same.
Regardless, many view Bitcoin as digital gold for some of these shared qualities. As a result, many consider it as a hedge against inflation.
So, where does Bitcoin and Inflation land? Well, it’s hard to say — mostly because we’re still quite early in the digital coin’s story.
Regardless, there’s no denying that as of April 2025, inflation is still ripe in our minds.
There’s also no denying that the value of Bitcoin has grown from around $10,000 in 2020 to $106,000 in 2024* (data from coinmarketcap.com).
Bitcoin, though, is more than just a possible hedge against inflation. It’s a new take on the global financial system. One with no centralized control, where the power is in the hands of users. Additionally, it’s not just something you store away for later.
Sure, plenty of people just buy and hold, but Bitcoin is used for all kinds of things.
From buying goods and services to sending payments, Bitcoin is part of millions of people's everyday lives. That’s why it’s so hard to just compare it to gold. It’s more than that; it’s something new.
Want to get your hands on some? Bitcoin Depot has you covered.
Head over to one of our over 8,700 Bitcoin ATMs (as of April 2025) across the U.S., Canada, and Australia.
Find your nearest location today.
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