Testing if Bitcoin Can Act as a Hedge Against High Inflation Levels

Abstract

This study investigates whether Bitcoin can be used for hedging against high inflation levels. In this report, the countries Argentina, Turkey, Venezuela, and Zimbabwe are examined. The study covers a ten-year period, where month-on-month inflation data and monthly Bitcoin prices from the beginning of 2014 to the end of 2023 were used. The results are based on bivariate vector autoregressions, where Granger causality tests and impulse response functions provide an indication of Bitcoin’s potential to hedge against inflation. The only case of Granger causality identified was between the Bitcoin price and the inflation for Turkey. The impulse response function suggested that the relationship was not significant enough for Bitcoin to be considered a hedging opportunity