INTERNATIONAL JOURNAL OF RESEARCH AND INNOVATION IN SOCIAL SCIENCE (IJRISS)
ISSN No. 2454-6186 | DOI: 10.47772/IJRISS | Volume IX Issue X October 2025
Page 8526
www.rsisinternational.org
Cryptocurrencies as an Inflation Hedge: A Comparative Study
Across High-Inflation Economies
Akomolehin F. Olugbenga
*
Department of Finance, College of Management & Social Science Afe Babalola University, Ado - Ekiti,
Ekiti - State, Nigeria.
*
Corresponding Author
DOI: https://dx.doi.org/10.47772/IJRISS.2025.910000694
Received: 07 November 2025; Accepted: 13 November 2025; Published: 21 November 2025
ABSTRACT
This study explores the effectiveness of cryptocurrencies as inflation hedges in high-inflation economies, with a
comparative focus on their performance relative to traditional hedging instruments such as gold and real estate.
Motivated by the global resurgence of inflation and growing distrust in fiat currencies, particularly in
economically fragile nations, the research investigates how digital assets like Bitcoin function as stores of value
under conditions of macroeconomic instability. Employing a literature-based review and cross-country case study
methodology, the analysis covers the period from 2018 to 2025 and draws on empirical findings from Argentina,
Venezuela, Turkey, Nigeria, and selected comparative cases including Zimbabwe and Lebanon.
The findings indicate that cryptocurrencies have demonstrated partial and context-dependent hedging
effectiveness, especially in countries with weak monetary institutions, currency devaluation, and limited access
to traditional financial systems. While gold remains the most reliable long-term hedge, and real estate offers
inflation-linked appreciation in select environments, both assets are constrained by issues of liquidity,
accessibility, and regulation. In contrast, cryptocurrencies offer high mobility and decentralized access but are
hindered by extreme volatility and regulatory uncertainty.
The study concludes that cryptocurrencies should be treated as complementary, not substitute, hedging tools,
requiring careful integration into diversified investment strategies. Policymakers are urged to develop transparent
regulatory frameworks that support innovation while safeguarding consumers, and future research should expand
empirical models and assess the role of stablecoins and central bank digital currencies (CBDCs) as emerging
inflation buffers.
Keywords: FCryptocurrencies, Inflation Hedge, High-Inflation Economies, Bitcoin, Gold, Real Estate, Policy
Frameworks
INTRODUCTION
Context and Rationale
The post-2018 global economic landscape has witnessed a resurgence of inflation, driven by a complex mix of
factors including expansive fiscal stimuli, supply chain disruptions, geopolitical tensions, and pandemic-related
economic shocks. These pressures have been especially pronounced in high-inflation economies such as
Argentina, Venezuela, Turkey, and Nigeria, where structural economic vulnerabilities—ranging from currency
devaluation and fiscal mismanagement to overreliance on commodity exports—have exacerbated inflationary
trends (IMF, 2022; World Bank, 2023). In response to eroding purchasing power and declining trust in fiat
currencies, households and investors in these regions have increasingly turned to alternative stores of value.
Among these alternatives, digital assets—particularly cryptocurrencies such as Bitcoin and Ethereum—have
emerged as novel hedging instruments. Their decentralized architecture, perceived scarcity (e.g., Bitcoin’s fixed
INTERNATIONAL JOURNAL OF RESEARCH AND INNOVATION IN SOCIAL SCIENCE (IJRISS)
ISSN No. 2454-6186 | DOI: 10.47772/IJRISS | Volume IX Issue X October 2025
Page 8527
www.rsisinternational.org
supply), and accessibility through peer-to-peer platforms have positioned them as viable inflation hedges in
unstable economic environments (Bouri et al., 2020; Trabelsi, 2022). Empirical observations suggest that in
economies like Venezuela and Nigeria, where inflation has eroded the value of local currencies, citizens have
resorted to cryptocurrencies not only for speculative gains but also for preserving capital and facilitating
remittances (Yermack, 2022; Ibrahim & Osinubi, 2021).
Problem Statement
Historically, investors have relied on traditional inflation-hedging assets such as gold and real estate to safeguard
value during inflationary periods. Gold, with its long-standing reputation as a universal store of value, and real
estate, with its income-generating potential and tangible utility, have both served as primary defenses against
currency devaluation (Wang et al., 2021; Gyourko & Keim, 2020). However, recent shifts in global economic
conditions and investor behavior have brought these traditional hedges under scrutiny. Gold has shown episodes
of volatility in recent years, while real estate is often hindered by illiquidity, regulatory risks, and high entry
barriers in several emerging markets (Shahzad et al., 2019). In contrast, cryptocurrencies, despite their own
volatility, offer advantages in portability, divisibility, and ease of access via mobile technology, making them
attractive to populations with limited access to formal financial markets (Dyhrberg, 2016; Fang et al., 2023).
This shift raises critical questions about the suitability and comparative performance of cryptocurrencies as
inflation hedges, particularly within high-inflation and economically volatile settings. The increasing digitization
of financial preferences calls for a re-evaluation of what constitutes an effective inflation hedge in the 21st
century.
Objectives of the Study
The overarching aim of this study is to critically evaluate the role of cryptocurrencies as inflation hedges across
high-inflation economies. Specifically, the study will:
i. Investigate the use of cryptocurrencies as an inflation hedge in high-inflation economies.
ii. Compare the inflation-hedging performance of cryptocurrencies with traditional assets such as gold and
real estate.
Research Questions
To achieve the above objectives, the study will address the following research questions:
I. How effective are cryptocurrencies as an inflation hedge in high-inflation environments?
II. How do they compare to conventional hedging instruments like gold and real estate?
Scope and Delimitation
This study adopts a global comparative approach, focusing on selected high-inflation economies—namely
Argentina, Venezuela, Turkey, and Nigeria—from 2018 to 2025. This time frame captures both pre- and post-
COVID-19 inflation dynamics and allows for a nuanced evaluation of macroeconomic shifts and asset-class
behavior. The analysis will integrate insights from peer-reviewed literature, policy reports, and empirical case
studies to explore the performance, adoption, and limitations of cryptocurrencies in relation to traditional hedging
tools.
The study is delimited to inflation-hedging behavior from an investor and household perspective. It does not
delve into monetary policy responses to inflation, though it considers the regulatory environment’s influence on
asset performance and investor access.
Significance of the Study
This research holds significant value for a wide range of stakeholders. For investors, particularly those in
inflation-prone countries, the findings will inform strategic decisions on asset diversification and capital
INTERNATIONAL JOURNAL OF RESEARCH AND INNOVATION IN SOCIAL SCIENCE (IJRISS)
ISSN No. 2454-6186 | DOI: 10.47772/IJRISS | Volume IX Issue X October 2025
Page 8528
www.rsisinternational.org
preservation. Financial planners and wealth managers will benefit from comparative insights that could reshape
portfolio management approaches in emerging markets. For policymakers, the study sheds light on how informal
financial instruments such as cryptocurrencies are influencing capital flows and public trust in national monetary
systems. Finally, for academics and financial researchers, this review contributes to the growing body of work
on digital finance, offering evidence-based evaluations of cryptocurrency utility under inflationary stress.
By integrating cross-country case studies with peer-reviewed insights, this study bridges a critical gap in
understanding the evolving role of cryptocurrencies in global inflation management—a topic of mounting
relevance in the era of digital finance and economic volatility.
CONCEPTUAL AND THEORETICAL REVIEW
Conceptual Review
One would thus have to seriously engage with a number of interrelated financial and economic concepts to
understand the inflation-hedging potential of cryptocurrencies in high-inflation economies. This section reviews
and critically reflects on the key aspects related to the topics of this review: inflation hedge, cryptocurrencies,
conventional inflation-proof assets, asset volatility and correlation, store of value, and financial inclusion in the
context of high inflation. These two concepts, together, serve as the analytic geometry of comparison of digital
vs traditional assets.
Inflation Hedging
In its most rudimentary form, inflation hedging describes the ability of an asset to maintain or grow its real value
– i.e. accounting for inflation – over time. An effective hedge generally has a positive relationship with inflation
such that its nominal returns increase as the value of fiat currencies decreases in purchasing power (Bekaert &
Wang, 2022). The success of an inflation hedge is measured in financial economics by the degree to which an
asset’s returns protect the real value of money against inflation, especially during extended periods of inflation.
Throughout history, inflation-hedging has taken the form of real assets like gold and real estate, with inherent
value and finite supply. During inflationary times, when investors search for a store of value against devaluing
currencies, these assets are widely considered as out-performing (Wang et al., 2021). Inflation hedging nowadays
includes inflation-indexed instruments such as TIPS, but such instruments are typically unavailable in emerging
and frontier economies where inflation is most pronounced (Gyourko & Keim, 2020).
This concept of testing cryptocurrency as digital and decentralized assets shows the pertinent in this study, to
examine the ability to be a part of strong hedge or diversifier especially in the countries experience chronic
inflation and weak in their monetary institution.
Cryptocurrencies
Cryptocurrencies are digital, decentralized currencies that are based on blockchain technology and enable
transactions between peers directly without the need for an intermediary party, such as a bank. Bitcoin and
Ethereum and a variety of altcoins are all functioning as alternative currencies and speculative instruments, but
are also starting to be tested for being part of the macro hedge (Bouri et al., 2020; Trabelsi, 2022).
One could argue that the defining feature of a cryptocurrency is its algorithmically enforced scarcity (e.g.
Bitcoin’s 21 million cap), pseudoanonymous ownership, and global portability. These features have made them
popular options for populations in economies facing hyperinflation or capital limitations, and who have lost
confidence in their local banks (Ibrahim & Osinubi, 2021; Yermack, 2022).
But the status of cryptocurrencies as inflation hedges is still a matter of debate. Or, they could be used for
speculative hedge funds or short-term protection against inflation; yet their high volatility of price and even risk
factors of regional risk will interfere with the robustness provision of original hedging assets (Fang and Xiao,
2023). This article investigates whether such computer-generated derivatives have performed as a consistent
inflation hedge in a number of different countries between 2018 and 2025.
INTERNATIONAL JOURNAL OF RESEARCH AND INNOVATION IN SOCIAL SCIENCE (IJRISS)
ISSN No. 2454-6186 | DOI: 10.47772/IJRISS | Volume IX Issue X October 2025
Page 8529
www.rsisinternational.org
Traditional Inflation-Hedging Assets: Gold and Real Estate
Gold is perhaps the ultimate inflation hedge there is. Being physically scare, a medium of exchange in history
and universally acceptable, gold possesses some “intrinsic value” (Carson, 2021), and therefore is regarded as a
safe-haven asset in inflation shock and financial market volatility (Shahzad et al., 2019; Wang et al., 2021). In
the last few years, though, gold has shown an unstable link with inflation, especially in times of negative real
interest & geopolitical instability rotating around corner, leaving doubts over its effectiveness as the only hedge
against inflation (Bouri et al., 2020).
Real estate in contrast provides a double hedging effect: capital appreciation, which follows from increasing
nominal prices, and rental income related to lease contracts that are indexed with inflation. Property is expected
to benefit from inflation yet its investment accessibility is constrained by high up-front expenses, illiquidity and
policy risks such as threat of expropriation or other forms of unstable regulation in weak economies (Gyourko &
Keim, 2020). Further, real estate markets may actually act counter-cyclically in periods of severe recession or
conflict-caused dislocation, so its role as a hedge against inflation turns negative in these settings.
In the context of this study, gold and real estate are considered as benchmark assets against which the relative
hedging effectiveness of cryptocurrencies will be assessed.
Volatility and Correlation in Asset Behavior
Volatility, the extent of price oscillation in an asset over a certain period, is an important factor when assessing
suitability as a hedge. A good hedge will not only move in the same direction as inflation but also in a relatively
smooth and predicable manner. Cryptocurrencies, such as Bitcoin and Ethereum, are one of the most volatile
financial assets worldwide, which are price sensitive to macroeconomic news, regulatory manages, and investor
attitudes (Dyhrberg, 2016; Fang et al., 2023). This begs the question: can an asset with significant short-term
volatility be trusted as a long-term hedge for inflation?
And there is correlation analysis, that judges how much your investment’s return follows inflation indices or
common hedge instruments. Among such studies, Shahzad et al. (2019) and Trabelsi (2022) applied dynamic
conditional correlation model between cryptocurrencies returns and inflation and found uncertain results: Some
of cryptocurrencies have moderate inflation hedge performance in some of time period or some monetary
regimes, while some others are more like high risky speculative assets with marginal to no response to inflation.
It is, therefore, important to also analyze the relationship between volatility and inflation, since it will be the
comparison between the cryptocurrencies and traditional hedges that will potentially determine if
cryptocurrencies can complement or substitute for traditional hedges.
Store of Value and Digital Scarcity
The term store of value is all about an asset’s capacity to hold purchasing power through time. For an asset to
serve well as a store of value, it should have the properties of being durable, divisible, portable, and easily
accepted, among others, which both gold and, to a greater extent, cryptocurrencies have (Yermack, 2022).
Bitcoin, for example, is commonly labeled as “digital gold” given its algorithmic scarcity alongside a
decentralized issuance schedule. Because it's untethered to national central banks and is designed to be immune
to inflationary debasement, it's theoretically a better store of value in an economy afflicted by fiat debasement
(Bouri et al., 2020). But the absence of any underlying value and the speculative features of numerous
cryptocurrencies make this approach problematic -- for instance, compared with assets such as gold and property
(Fang et al., 2023).
In so doing, it will contribute to debates around financial sovereignty and the digitalisation of assets through an
evaluation of the legitimacy of cryptocurrencies as stores of value in the national experiences of inflation.
INTERNATIONAL JOURNAL OF RESEARCH AND INNOVATION IN SOCIAL SCIENCE (IJRISS)
ISSN No. 2454-6186 | DOI: 10.47772/IJRISS | Volume IX Issue X October 2025
Page 8530
www.rsisinternational.org
Financial Inclusion and Access in High-Inflation Environment
In countries with high rates of inflation, where the traditional banking system is frequently underdeveloped or
not trusted, promoting financial inclusion through digital channels is particularly relevant. Crypto-currencies
create an alternative path in the ladder of asset ownership for people who are excluded from traditional finance
due to mobile technology and peer-to-peer exchange which facilitate borderless transactions (Ibrahim & Osinubi,
2021).
That functional use especially in parts of the world where central banks had imposed capital controls or limited
access to foreign exchange, has given cryptocurrencies an appeal beyond being a hedge, but a tool for economic
resistance. The intersection of inflationary pressure and tech adoption has rendered digital assets more useful in
Nigeria, and it in countries like Venezuela and Argentina, where traditional asset acquisition is limited or
unavailable to much of the populace (World Bank, 2023; Trabelsi, 2022).
The novelty of this study is the consideration of financial access as a mediating variable with respect to the
effectiveness of inflation hedging, adding the consideration that theoretical attributes of an asset have to be
measured against practical aspects of its usability.
The above are basic building blocks to understand and analyze the hedging behavior of cryptocurrencies in hyper-
inflation economies. By analyzing inflation and assets volatility and correlation,traditional stores of value, and
financial inclusion within the rubric of digital assets, we develop a holistic framework for comparing
cryptocurrencies to other inflation hedge instruments. The empirical section that follows is informed by these
theoretical results, and seeks to test whether cryptocurrencies in practice provide reliable inflation hedges in the
era of financial turbulence, technological revolution, volatility in mainstream financial markets, and shifting
investor preferences.
Theoretical Framework
Crucially, the analysis is based on the amalgamation of four mutually supportive financial and economic theories
that underpin the behaviour, the utility, and the perception of cryptocurrency as a form of inflation hedge in
widespread high-inflation environments. These are Modern Portfolio Theory, Inflation Hedging Theory, the
Efficient Market Hypothesis, and the Behavioral Finance Theory. Both offer a thorough 3-dimensional view of
the financial features and the social-psychological aspects of cryptocurrency use during the time of inflation.
Modern Portfolio Theory (Markowitz, 1952) provides a solid theoretical framework to understand how investors
can maximize risk-adjusted returns through portfolio diversification. By this logic, an asset belongs in a portfolio
not so much based on its stand-alone performance, but by how (un)correlated it is compared to the other assets
you already own. Cryptocurrencies (notably, with Bitcoin and Ethereum as their dominant representatives) have
been actually found to have low (or zero) correlation with traditional assets, like stocks, bonds and gold in some
market regimes (Bouri et al., 2020; Fang et al., 2023). This characteristic suggests that cryptocurrencies can
improve portfolio efficiency, especially in inflationary environments where traditional hedges may underperform
or become inaccessible. While their potential high return and volatility warrant a careful treatment to risk-reward
trade-offs, this also underscores the importance of examining their contribution to portfolio resilience rather than
as static hedges.
Inflation Hedging Theory Bodie (1976) also proposed a formal definition for effective hedging assets by stating
“An effective hedge is an asset whose real return does not vary over time, i.e. an asset whose return is perfectly
negatively correlated with the price level. Assets like gold (Blose & Shieh, 1995; Ciner, 2001; Alquist & Kilian,
2010; Islamoglu, 2016) and real estate (Gyourko & Keim, 2020) have historically served this role, with the
observed ability to yield returns reflectively correlated with inflation (Wang et al., 2021). One interesting
application of such theory is the consideration of return profiles of cryptocurrencies especially in inflationary
economies suffering from currency depreciation and macroeconomic instability. Although recent studies have
indicated that some cryptocurrencies may provide some hedging properties in some circumstances (Trabelsi,
2022; Shahzad et al., 2019), the heterogeneity of their performances across time and jurisdictions has led to doubts
over their reliability as systematic inflation hedges.
INTERNATIONAL JOURNAL OF RESEARCH AND INNOVATION IN SOCIAL SCIENCE (IJRISS)
ISSN No. 2454-6186 | DOI: 10.47772/IJRISS | Volume IX Issue X October 2025
Page 8531
www.rsisinternational.org
The Efficient Market Hypothesis (Fama, 1970; Fama, 1991) adds a further dimension to this debate by testing
the degree to which asset prices - in the case of this paper, the prices of cryptocurrencies - reflect efficiency in
terms of available information, including inflation expectations. In the EMH, markets, semi-strong or strong,
should react quickly to new macroeconomic indicators, such as consumer price indices or changes in monetary
policy by central banks. Supposedly, this means that cryptocurrency prices should dynamically react to
inflationary changes and, thus, are great instruments for storing value. Sometimes real life crypto markets are not
fully reflected by EMH assumptions. Market inefficiencies are still prevalent given information asymmetry,
regulatory disintegration, speculative psychology, and a large share of retail investors. A number of studies
demonstrate the thin and irregular reactions of cryptocurrencies to macroeconomic indicators, revealing at most
a partial efficiency (Fang et al., 2023; Wang et al., 2021). This partial inefficiency, if it undermines predictability,
also helps to price discovery in more opaque monetary settings, such as those operating under high inflation and
deep institutional weaknesses.
More centrally to the adoption of cryptocurrencies is Behavioral Finance Theory, which contradicts the rational
actor model by injecting cognitive biases, heuristics and emotions into investment behavior. Amid the terror of
high-inflation economies, when local currencies devalue rapidly and public trust in financial institutions
diminishes, people's decision-making is often based chiefly on fear, uncertainty, and the aspiration toward
financial self-sufficiency. Behavioral finance can shed light on why cryptocurrencies are becoming hedging or
alt-stores of value in countries like Nigeria, Argentina, and Venezuela despite their volatility (Ibrahim & Osinubi,
2021; Yermack, 2022). They are not necessarily driven by performance data or empirical results — these myths
are about control and trust and story, in a decentralized world and a peer-to-peer world and not the world of the
certificate authority monopoly that we’re used to. Perceived sovereignty and portability that cryptocurrencies
offer while being free from national policies are other factors that serve to create an emotional response in
environments of institutional distrust and macroeconomic malaise.
Collectively, these theories represent an integrated model for this research. Modern Portfolio Theory offers a
quantitative argument for why cryptocurrencies should be part of an investor’s diversified portfolio. The Criteria
of Inflation Hedging Theory lays out the standard by which an asset will hedge against inflation, and the Efficient
Market Hypothesis questions the validity for assuming that cryptographic assets can represent meaningful and
efficient inflation expectations. In contrast, Behavioral Finance provides a qualitative critical view why people
are using cryptocurrencies without empirical certainty. With equal attention paid to performance analysis and
investor behavior, the theoretical framework of Inflation Hedging Theory and Behavioral Finance Theory is
evident in this study. These theories taken together inform on the functional and perceptual aspects of
cryptocurrencies as inflation hedges and provide a strong theoretical basis for a comparative analysis in high-
inflation economies.
Conceptual Framework
Figure 1: Conceptual Framework for Evaluating the Inflation-Hedging Effectiveness of Cryptocurrencies
Compared to Traditional Assets in High-Inflation Economies (2018–2025)
INTERNATIONAL JOURNAL OF RESEARCH AND INNOVATION IN SOCIAL SCIENCE (IJRISS)
ISSN No. 2454-6186 | DOI: 10.47772/IJRISS | Volume IX Issue X October 2025
Page 8532
www.rsisinternational.org
Explanatory Note on the Conceptual Framework
The conceptual l model of the study offers a unified representation of relationships amongst multiple variables
affecting the potency of inflation hedging instruments in high inflation regimes. At the core of the framework is
the predictor variable, i.e., the type of asset with which inflation has been hedged, where we consider
cryptocurrencies (Bitcoin and Ethereum), gold, and real estate as de-coupled from the benchmark assets. These
assets are judged on their ability to hold purchasing power in times of lan inflation, economic instability, and
currency debasement.
The dependent variable (hedging effectiveness) is the change in wealth of an asset in real terms under an
inflationary situation ( wings of preserve or enhance ). This is measured by inflation-adjusted ROI, correlation
with consumer price index (CPI) and value appreciation. The relationship between the type of asset and the
effectiveness of hedging is not direct in itself, but is influenced by multiple mediating and moderating variables,
which explain why and under which situations this relationship becomes stronger or weaker.
As an intermediary between these is a set of macroeconomic or market conditions — including, in particular, the
rates of inflation and exchange rate volatility, as well as the overall level of economic activity (real GDP growth).
These variables explain how inflation is transmitted to erode purchasing power and trigger the effect on the
investor's reaction. For example, with inflation elevated and persistent, investors are more inclined to look at
other assets as protection that has more immediate or longer-lasting value preservation.
Several institutional, behavioral, and structural barriers moderate the association. Regulatory aspects like the
legality of cryptocurrencies, central bank regulations, exchange rules, and tax considerations have significant
implications over whether these assets can be easily accessed, owned or transferred. If regulation is positive or
show a permissive nature, adoption tends to increase and increases the hedging capabilities of crypto-assets.
Conversely, bans and limits frequently drive activity underground into the informal sector, reducing liquidity and
investor confidence.
No less relevant are behavioural factors, like investor sentiment and confidence. If you live in an economy with
monetary mismanagement, frequent bank failures, or in which the currency itself is being devalued all the time,
it’s very likely that you feel probably less confident in the fiat institution. This pushes people to adopt
decentralized digital assets, not to profit from speculation, but to gain psychological comfort and an illusion of
financial sovereignty. Other considerations, such as digital literacy, social influence, and mobile financial
platform exposure, also shape the perception of cryptocurrencies as a potential hedge.
Effectiveness is also moderated by liquidity and market depth, especially in real estate and cryptocurrencies. The
easier transactable and the more fungible the asset, the better it will perform under extreme financial pressure.
Therefore, although real estate may provide capital appreciation up to a certain point of time, limited liquidity
may impact the hedging capabilities on the short term relatively to highly tradeable crypto assets.
Such a framework accounts for inflati on hedging across time and across several layers in a conom y in distress.
It places cryptocurrency not just as a new asset class, but within the context of an entire ecosystem influenced by
economic factors, regulatory frameworks and human nature. In doing so, it lays down a strong underpinning for
understanding when, how, and under which scenarios, the various types of assets can act as successful hedges
against inflation.
RESEARCH METHODOLOGY
The methodology employed in this study integrates a mixed qualitative-quantitative framework designed to assess
the effectiveness of cryptocurrencies as inflation-hedging tools in comparison to traditional assets—gold and real
estate—across selected high-inflation economies from 2018 to 2025. This approach draws on both empirical asset
performance metrics and macroeconomic indicators to support a multi-layered analysis that combines case study
review, conceptual analysis, and cross-asset comparisons.
The research utilizes secondary data sourced from peer-reviewed academic literature, international financial
INTERNATIONAL JOURNAL OF RESEARCH AND INNOVATION IN SOCIAL SCIENCE (IJRISS)
ISSN No. 2454-6186 | DOI: 10.47772/IJRISS | Volume IX Issue X October 2025
Page 8533
www.rsisinternational.org
databases (e.g., IMF, World Bank, CoinMarketCap, Investing.com), national statistical agencies, and reputable
cryptocurrency analytics platforms. Macroeconomic variables such as the Consumer Price Index (CPI), exchange
rate depreciation, and interest rate trends are triangulated with asset-specific indicators, including return on
investment (ROI), volatility indices, and liquidity constraints. Country selection—comprising Argentina,
Venezuela, Turkey, Nigeria, and Lebanon—is based on the prevalence of sustained inflationary pressures,
currency instability, and documented instances of crypto adoption as a store of value.
Case studies form a central methodological pillar, allowing for deep-dive assessments into each country's inflation
environment, regulatory posture, and hedge asset behavior. The performance of Bitcoin and other major altcoins
is tracked alongside traditional hedges using annualized return and volatility metrics. A comparative matrix and
visual tools such as scatter plots, correlation heatmaps, and inflation-asset overlay charts are developed to capture
differences in hedge performance across jurisdictions and asset classes. These are supplemented by qualitative
insights derived from policy reports, investor sentiment analyses, and behavioral economics literature.
The research further integrates a conceptual framework to structure the relationships among the independent
variable (inflationary pressure), the dependent variable (cryptocurrency hedge performance), and key moderating
(regulatory constraints, investor sentiment) and mediating variables (accessibility and liquidity). The framework
is graphically represented to show the pathways through which macroeconomic instability triggers hedge-seeking
behavior, moderated by trust in fiat institutions and legal status of crypto markets.
While the study remains primarily descriptive and exploratory in nature, it sets a robust foundation for future
inferential analysis. Recommendations include the use of Autoregressive Distributed Lag (ARDL) and
Generalized Autoregressive Conditional Heteroskedasticity (GARCH) models to statistically evaluate the
inflation-hedging dynamics across time and regions. Such extensions would enable causality testing and time-
series decomposition of asset behavior in high-volatility environments.
LITERATURE REVIEW
The pursuit of inflation hedging instruments remains a central concern in financial economics, particularly for
investors seeking to preserve the real value of their assets in periods of rising consumer prices. The conceptual
appeal of an inflation hedge lies in its ability to mitigate the erosion of purchasing power caused by sustained price
increases, typically measured through consumer price indices (CPI). Traditionally, assets such as gold, real estate,
and inflation-linked bonds have been favored for their capacity to store value or their intrinsic linkage to inflation
dynamics (Bekaert & Wang, 2022; Conlon et al., 2021). A robust inflation hedge is characterized by several key
attributes: long-term value preservation, high liquidity, broad accessibility, and a negative or low correlation with
fiat currencies (Wang et al., 2021; Iqbal et al., 2022). These characteristics form the basis for evaluating newer
financial instruments such as cryptocurrencies against conventional inflation-hedging assets.
Cryptocurrencies, particularly Bitcoin and Ethereum, have emerged as digital assets with fixed supply rules and
decentralized issuance mechanisms, drawing comparisons to traditional stores of value like gold. Bitcoin’s
algorithmically capped supply of 21 million coins and its independence from monetary authorities position it as a
potential hedge in inflationary environments (Dyhrberg, 2016; Trabelsi, 2022). Empirical studies have increasingly
explored the inflation-hedging qualities of cryptocurrencies, though their findings remain mixed and context-
specific. Bouri et al. (2020) showed that Bitcoin may exhibit hedge-like properties in emerging markets,
particularly where rapid currency depreciation erodes the credibility of monetary regimes. Similarly, Trabelsi
(2022) highlighted that in inflation-plagued economies such as Venezuela and Argentina, cryptocurrencies have
functioned not merely as speculative assets but as practical tools for value preservation amidst hyperinflation and
capital controls. This suggests that despite their volatility, cryptocurrencies may serve as functional hedges,
especially in contexts where traditional alternatives are inaccessible or institutionally constrained.
However, the limitations of cryptocurrencies as stable inflation hedges are equally pronounced. Ibrahim and
Osinubi (2021) observed that while adoption of digital currencies has expanded, their high volatility, regulatory
uncertainty, and limited market maturity often undermine their efficacy in consistently preserving wealth under
inflationary stress. This finding aligns with more recent volatility modeling studies by Eross et al. (2021), which
INTERNATIONAL JOURNAL OF RESEARCH AND INNOVATION IN SOCIAL SCIENCE (IJRISS)
ISSN No. 2454-6186 | DOI: 10.47772/IJRISS | Volume IX Issue X October 2025
Page 8534
www.rsisinternational.org
confirm that Bitcoin’s inflation-hedging performance is time-varying and strongly influenced by investor
sentiment, macroeconomic shocks, and speculative cycles. Furthermore, liquidity and accessibility challenges
continue to shape the hedging utility of cryptocurrencies. While mobile-based informal trading networks in Nigeria
and Kenya have facilitated broader adoption (Olayeni et al., 2022), aggressive regulatory interventions in countries
like Turkey, China, and India have eroded investor confidence and reduced market fluidity (Fang et al., 2022;
IMF, 2023). These dynamics reveal that the inflation-hedging potential of crypto assets is highly conditional—
moderated by legal frameworks, digital literacy, and technological infrastructure.
In contrast, traditional hedging instruments offer more historically validated roles in protecting against inflation.
Gold, in particular, has long been considered a canonical inflation hedge due to its scarcity, independence from
sovereign risk, and deep global liquidity. Several empirical analyses confirm that gold tends to maintain real value
during inflationary episodes, particularly under negative real interest rate regimes (Wang et al., 2021; Shahzad et
al., 2019). Its trust-based appeal, low counterparty risk, and institutional acceptance make it a resilient component
of inflation-resistant portfolios, especially during systemic financial shocks (Iacoviello & Navarro, 2019). Real
estate, on the other hand, provides inflation protection primarily through rental income adjustments and capital
appreciation, especially when lease structures are indexed to inflation or prevailing market rents (Gyourko &
Keim, 2020; de Wit et al., 2023). Nonetheless, real estate markets in developing economies are often beset by
structural inefficiencies such as illiquidity, political risk, high transaction costs, and weak property rights, which
may limit their effectiveness as hedges (Njiru & Letema, 2021).
Other conventional instruments, including commodities and Treasury Inflation-Protected Securities (TIPS), offer
varying degrees of inflation protection. Commodities tend to track global price cycles, providing a natural hedge
against supply-driven inflation shocks (Narayan et al., 2022). TIPS, while directly indexed to inflation, remain
largely confined to developed market contexts, limiting their accessibility to investors in inflation-prone emerging
economies. Thus, the effectiveness of traditional hedges is mediated by factors such as institutional robustness,
market access, and investor capability, rendering their performance context-dependent.
Comparative studies assessing cryptocurrencies vis-à-vis traditional hedges offer nuanced insights into their
complementary roles. Dyhrberg (2016), through GARCH modeling, found that Bitcoin exhibits intermediate
hedging behaviors between gold and fiat currencies, suggesting its potential as a hybrid hedge under certain
monetary conditions. Shahzad et al. (2019), in a meta-analysis of G7 markets, concluded that while gold continues
to be the dominant safe haven, Bitcoin’s non-linear correlation with inflation indicators enhances portfolio
diversification. Similarly, Conlon et al. (2021) found that during inflation shocks, Bitcoin may not offer consistent
hedging benefits but could improve Sharpe ratios when combined with traditional assets. These findings
underscore that crypto assets may not be substitutes for gold or real estate but can serve as strategic complements,
offering diversification benefits in mixed-asset portfolios.
Despite growing scholarly attention, substantial gaps remain in the literature. First, most empirical assessments
are skewed toward advanced economies, with limited multi-country studies examining inflation-hedging
effectiveness in the Global South. The heterogeneity of inflation experiences across regions—driven by
macroeconomic instability, fiscal mismanagement, and institutional weaknesses—is insufficiently captured in
current models. Second, few studies incorporate regional factors such as regulatory fragmentation, digital
infrastructure gaps, and the prevalence of informal markets into the analysis of asset behavior. This omission limits
the external validity of findings in contexts where conventional monetary systems are dysfunctional or
inaccessible. Third, the post-pandemic inflation surge (2022–2025) has altered the global economic landscape in
ways that remain underexplored in existing studies. The unprecedented fiscal and monetary responses to COVID-
19, the rise of decentralized finance (DeFi), and the growing interest in stablecoins and Central Bank Digital
Currencies (CBDCs) necessitate updated analytical frameworks (Schär, 2022; BIS, 2023).
Moreover, most traditional analyses of hedging effectiveness rely on linear regression or correlation estimates,
which may overlook the behavioral, regulatory, and technological factors that modulate asset performance under
inflationary pressure. A more interdisciplinary approach is required—one that integrates financial econometrics
with insights from behavioral finance, regulatory studies, and digital innovation. Such a perspective would offer a
more granular understanding of how cryptocurrencies and traditional hedges behave across inflationary cycles,
INTERNATIONAL JOURNAL OF RESEARCH AND INNOVATION IN SOCIAL SCIENCE (IJRISS)
ISSN No. 2454-6186 | DOI: 10.47772/IJRISS | Volume IX Issue X October 2025
Page 8535
www.rsisinternational.org
regulatory regimes, and investor demographics.
It is against this backdrop that the present study makes its contribution—by offering a comparative, multi-country
review of the inflation-hedging potential of cryptocurrencies relative to gold and real estate, focusing on high-
inflation economies such as Nigeria, Argentina, and Venezuela. By integrating recent post-COVID developments,
incorporating region-specific variables, and adopting a holistic methodological approach, the study addresses key
gaps in the literature and provides actionable insights for investors, regulators, and policy makers.
Case Studies of High-Inflation Economies (2018–2025)
This section presents a comparative analysis of selected high-inflation economies to evaluate the real-world
performance of cryptocurrencies and traditional inflation hedging instruments such as gold and real estate. The
case studies—Argentina, Venezuela, Turkey, and Nigeria—have been chosen based on their significant
inflationary episodes, high exchange rate volatility, and notable trends in alternative asset adoption. Each case
offers insights into how macroeconomic instability, monetary policy responses, and socio-political conditions
shape asset behavior and investor preferences. Quantitative indicators such as Consumer Price Index (CPI),
exchange rate depreciation, and adoption metrics are triangulated with qualitative evidence to assess the relative
inflation-hedging effectiveness of cryptocurrencies vis-à-vis traditional options.
Figure 2: Geographic Distribution of Cryptocurrency Adoption in High-Inflation Economies (2018–2025)
The thematic world map above highlights countries with both high inflation and significant cryptocurrency
adoption between 2018 and 2025. Locations such as Argentina, Venezuela, Nigeria, and Turkey are marked,
illustrating the global dispersion of crypto adoption in response to monetary instability and currency depreciation.
This map visually reinforces the geographic relevance of the study. Let me know if you'd like to include adoption
intensity indicators or a legend.
Source: Compiled by the author based on secondary data from the International Monetary Fund (IMF, 2023),
World Bank (2023), and peer-reviewed studies such as Trabelsi (2022) and Ibrahim & Osinubi (2021), identifying
economies with sustained inflationary pressures and elevated peer-to-peer crypto transaction volumes.
Argentina
Argentina suffered from stagflation between 2018 and 2025, experiencing 108% and 90% CPI inflation and ARS
depreciation against USD in 2023, respectively (IMF, 2023). This macroeconomic instability led to a change in
the behavior of investors, and the public lost confidence in national currency and financial institutions.
There was a flurry of cryptocurrency adoption in Argentina as the peso plummeted. Bitcoin in particular acted as
a counter-currency, and informal hedging of trading volume on both LocalBitcoins and Binance soared during
times of currency crisis (Trabelsi, 2022). Retail investors sought refuge in crypoto-currencies to protect against a
depreciating currency, attracted by their lack of borders and the difficulty of converting dollar holdings through
legal banking channels.
INTERNATIONAL JOURNAL OF RESEARCH AND INNOVATION IN SOCIAL SCIENCE (IJRISS)
ISSN No. 2454-6186 | DOI: 10.47772/IJRISS | Volume IX Issue X October 2025
Page 8536
www.rsisinternational.org
Data show that at important devaluation times, Bitcoin surpassed the peso in inflation corrected returns. For
instance, Bouri et al. (2020) observation that Bitcoin, despite its high volatility, maintained more of its real value
over 12-month holding periods than the Argentine peso or even U.S. dollar-linked saving accounts.
Gold, which is typically used as a hedge, was an alternative that gave more stable returns but less accessible for it
could not be easily moved out of the country because of capital control and was taxed on bullion imports, with
high entry costs. Cryptocurrencies, on the other hand, were traded on peer-to-peer exchanges that anyone could
access and didn’t need to be stored physically, making them more suited to retail users. So in an environment
where Argentina’s monetary environment was vastly declining, gold was acting as a steady long term store of
value and cryptocurrencies as a nimble, open and dynamic hedge to inflation.
Venezuela
In Venezuela represents one of the most extreme inflationary environments globally, with hyperinflation peaking
at over 65,000% in 2018 and stabilizing at still elevated levels of 400–500% between 2020 and 2023 (World Bank,
2023). The collapse of the Venezuelan bolívar triggered widespread informal dollarization, and in response, the
government introduced the Petro, a state-backed cryptocurrency pegged to oil reserves. However, the Petro failed
to gain legitimacy due to opacity, poor convertibility, and lack of trust (Yermack, 2022).
In contrast, decentralized cryptocurrencies—particularly Bitcoin and Dash—witnessed significant grassroots
adoption. Peer-to-peer trading platforms such as LocalBitcoins became lifelines for families receiving remittances,
purchasing essential goods, or storing value. Trabelsi (2022) highlighted Venezuela as a case where
cryptocurrencies functioned as a shadow monetary system, filling institutional voids in payment infrastructure,
remittance flows, and even business transactions.
Empirical data reveals that Bitcoin and Dash provided positive inflation-adjusted returns during the worst
inflationary episodes, outperforming both the bolívar and the Petro. Moreover, their borderless and censorship-
resistant nature allowed Venezuelans to bypass rigid capital controls, making them superior functional hedges in
practice.
Gold, while valued, remained largely out of reach for average Venezuelans due to its scarcity in the domestic
market and prohibitive costs. As such, cryptocurrencies filled a void left by both failed fiat systems and
inaccessible traditional hedges, marking Venezuela as a key example of crypto-based survival finance.
Turkey
The inflation crisis in Turkey intensified from 2018 to 2025, as annual CPI inflation surpassed 80 percent in 2022
and the Turkish lira lost more than 50 percent of its value in several waves against OECD key currencies (OECD,
2023). This instability was the product of a combination of an unconventional monetary policy, political meddling
in central banking, and high levels of external debt.
As the lira tumbled, interest in cryptocurrencies boomed. 2015–2016), trading volumes on platforms such as Paribu
and BTCTurk reached scales never seen before in 2021–2022, and Bitcoin itself became a currency hedge and a
speculative asset (see Fang et al. But Turkey replied with restrictive steps, such as banning crypto payments in
2021 and introducing tighter control of digital exchanges. The regulatory backlash created an element of
uncertainty that had long-term investors skittish, despite adoption being high in the short term.
At the same time, real estate property values in Turkey accommodated a simultaneous boom in the consumer
sector, inflating property values as both local and overseas investors favored real estate as a hedge against inflation.
Gyourko and Keim (2020) reported that Turkish real estate, particularly in Istanbul and Ankara, experienced
capital gains higher than the rate of inflation especially in dollar and euro based real estate transactions. At the
same time, the market also over-heated, runs in the price caused concerns for continuation.
Gold continued to enjoy respect as a store of value in Turkey, across the culture and in its institutions. However,
the need for logistics and security restricted adoption among younger and more mobile investors, particularly
INTERNATIONAL JOURNAL OF RESEARCH AND INNOVATION IN SOCIAL SCIENCE (IJRISS)
ISSN No. 2454-6186 | DOI: 10.47772/IJRISS | Volume IX Issue X October 2025
Page 8537
www.rsisinternational.org
during lockdowns and periods of capital controls.
The Turkish example serves to highlight the dynamic tension playing out between cryptos and real estate, the
former endearing itself to a young, tech-savvy investor audience, the latter a favorite of the deeper pocketed set
looking to preserve capital over the long term in the face of inflating away pressures.
Nigeria
Nigeria’s inflationary problems escalated from 2018 to 2025; headline inflation average over 18% and naira
devalued by over 60% with the U.S. dollar in the period under review (CBN, 2023). Exchange rate misalignments,
fuel subsidy distortions, and falling oil revenues all had a dilapidating effect on the macroeconomic environment.
Even with a 2021 ban on cryptocurrency through its formal financial sector imposed by the Central Bank of Nigeria
(CBN), the country remained one of the top performers in global peer-to-peer crypto trade – fueled by platforms
like Paxful and Binance P2P. This community-led acceptance was driven by rising inflation, forex scarcity,
expensive transfer charges and youth joblessness (Ibrahim & Osinubi, 2021).
From practical experience, it has been observed that Cryptocurrencies notably Bitcoin and stablecoins such as
USDT were used to hedge against inflation, save and transfer value across borders and in some cases even fund
startups within the country. Their mobile-centric nature, low transaction minimums and pseudonymous personal
design proved popular for a demographic traditionally sidelined from the official financial system.
Nigeria real estate was however illiquid and inaccessible as there were inefficient land documentation systems,
high capital intensiveness and the rental yields in some urban areas were low. And, to be sure, owning property
remained a means of safely hoarding wealth, but it was not an effective short-term hedge against inflation for most
people.
Gold was held as a cultural value, but was not counting as a means of financial transaction partly due to lacking
market infrastructure to trade gold like the retail financial market to buy and sell gold. Justifies the case for Nigeria
by characterizing the extent to which cryptocurrencies trump traditional hedges not just in terms of return but
actually utility, especially for the under-served and the informal entrepreneurs.
Lebanon, Zimbabwe, and Iran: Brief Comparative Insights
With each of these economies comes a different blend of high inflation, political instability, and crippled financial
systems in which cryptocurrencies took root as a viable (if flawed) alternative.
In Lebanon, post 2019 financial collapse led to banking restrictions, deposit freezes and inflation over 200 per cent
by 2023. Cryptocurrencies such as USDT on the Tron network were increasingly important for value storage and
remittance receipts, in particular within the Lebanese diaspora (Fang et al. 2023). But lack of digital literacy and
electricity shortages restricted their use in remote regions.
Zimbabwe, which has repeatedly experienced hyperinflation and currency redenomination since 2018, pulled its
citizens toward the U.S. dollar and Bitcoin. Informally, despite government resistance and regulatory ambivalence,
Bitcoin served as a form of savings and a medium of exchange, one frequently conducted via mobile devices.
People in Iran too, with imposed sanctions, currency devaluation and more than 40% inflation, have been getting
into Cryptos and Bitcoin mining. The government had initially encouraged crypto mining as a source of revenue,
before restricting it over fears of capital flight. Nonetheless, informal use of crypto continued as a way to protect
against inflation and geopolitical risk.
These nations highlight the institutional and socio-political boundaries that the adoption of cryptocurrencies and
the effectiveness of hedges are subject to. In state-failure or if not policy inconsistency settings, crypto-assets
represent a pressure valve to store value, with the pressure well functioning or failing depending on access, literacy
and regulatory tolerance.
INTERNATIONAL JOURNAL OF RESEARCH AND INNOVATION IN SOCIAL SCIENCE (IJRISS)
ISSN No. 2454-6186 | DOI: 10.47772/IJRISS | Volume IX Issue X October 2025
Page 8538
www.rsisinternational.org
Figure 3 Inflation Trends vs. Asset Performance Chart
The chart above illustrates Argentina’s inflation trends (CPI and peso depreciation) compared to the returns of
Bitcoin, gold, and real estate from 2018 to 2025. It demonstrates that while Bitcoin exhibits higher but volatile
returns, gold shows more consistent performance, and real estate yields are moderate but stable. This visual
underscores the trade-offs in risk and return across asset classes in inflationary environments.
COMPARATIVE ANALYSIS AND DISCUSSION
The empirical landscape on the role of cryptocurrencies as inflation hedges is increasingly contested and context-
specific. While early studies predominantly examined gold and real estate as traditional hedging tools in
inflationary contexts (Wang et al., 2021; Gyourko & Keim, 2020), recent literature has shifted attention to the
novel, decentralized attributes of cryptocurrencies, especially Bitcoin, as emergent alternatives. The volatility,
accessibility, and regulatory fragility of these digital assets have made their inflation-hedging function highly
conditional and time-variant (Bouri et al., 2020; Trabelsi, 2022).
Synthesizing across empirical analyses and country-level case studies—such as those of Venezuela, Argentina,
Nigeria, and Zimbabwe—cryptocurrencies exhibit partial hedging characteristics, especially in contexts where
national currencies experience hyperinflation, capital controls, or institutional trust failures. In these environments,
households often prioritize “functional hedging” over financial speculation, leveraging crypto assets as a means
of preserving purchasing power, maintaining transactional flexibility, and avoiding state-sanctioned devaluation
(Trabelsi, 2022; Ibrahim & Osinubi, 2021). This functional perspective marks a departure from the classical
hedging paradigm rooted in stable and well-regulated financial systems.
However, these advantages are significantly mediated by local variables such as digital infrastructure, legal
ambiguity, mobile payment ecosystems, and peer-to-peer (P2P) networks. In Nigeria, for example, the rise of
mobile-based cryptocurrency usage via informal exchanges underscores a grassroots form of financial adaptation
that contrasts with the more regulated environments seen in advanced economies (Baur et al., 2018; Narayanan &
Clark, 2023). Yet the Nigerian case also reflects the downside of abrupt regulatory crackdowns, which can rapidly
erode trust, shrink liquidity, and introduce additional volatility—thereby undermining any perceived stability
benefits of the asset class.
INTERNATIONAL JOURNAL OF RESEARCH AND INNOVATION IN SOCIAL SCIENCE (IJRISS)
ISSN No. 2454-6186 | DOI: 10.47772/IJRISS | Volume IX Issue X October 2025
Page 8539
www.rsisinternational.org
Furthermore, cross-asset comparative studies confirm that cryptocurrencies demonstrate a weaker and more
inconsistent correlation with inflation compared to gold, which continues to exhibit strong long-run hedging
capability, particularly during periods of negative real interest rates (Bekaert & Wang, 2022). Real estate, while
theoretically inflation-proof due to capital appreciation and rental indexation, is hampered in high-inflation
economies by illiquidity, high transaction costs, and political risks surrounding property rights (Gyourko & Keim,
2020). Bitcoin, in contrast, offers high mobility and low barriers to entry, but these benefits are offset by extreme
price volatility and high sensitivity to macro and behavioral shocks (Shahzad et al., 2019).
An important insight emerging from this synthesis is that cryptocurrencies do not universally function as inflation
hedges but rather exhibit conditional effectiveness. Their success depends on factors such as short-term inflation
expectations, currency instability, institutional trust, and the evolution of the digital finance ecosystem. These
variables are often absent from traditional hedging models, suggesting the need for a broader, cross-disciplinary
theoretical framework that integrates behavioral finance, institutional economics, and financial technology.
From a methodological standpoint, traditional hedging metric such as regression-based inflation betas and
correlation coefficients, fail to capture the multidimensional nature of hedging in fragile economies. The literature
largely omits how socio-psychological trust factors, network effects, and digital literacy influence investor
behavior under inflation stress. Moreover, only a limited number of studies apply advanced econometric models,
such as ARDL or GARCH, in high-inflation developing contexts to trace dynamic and asymmetric responses of
asset classes to inflation shocks. This limits the ability to generalize findings or derive robust policy implications.
Critically, the discussion also reveals that the categorization of cryptocurrencies purely as speculative or volatile
assets may overlook their real-world functionality in specific crisis settings. The binary framing of
cryptocurrencies as either hedges or non-hedges fails to acknowledge their evolving role as “monetary substitutes”
or “escape assets” in inflation-scarred economies, where institutional voids preclude the effectiveness of traditional
stores of value. In this regard, the inflation-hedging utility of cryptocurrencies is not merely financial but deeply
socio-political, often reflecting deeper trust gaps between citizens and state-managed monetary systems.
Thus, while gold remains the most robust and stable inflation hedge across all tested parameters, cryptocurrencies
offer a flexible, if volatile, supplement particularly where access to traditional hedging tools is constrained. Real
estate, while effective in theory, requires supportive institutional frameworks and remains out of reach for low-
income households in most high-inflation economies. Ultimately, the comparative performance of these asset
classes is context-dependent, and policy responses aimed at enhancing household financial resilience must
consider local access, digital readiness, and regulatory coherence.
This study, by integrating empirical insights and comparative case studies, underscores the importance of moving
beyond generic policy prescriptions and adopting a nuanced approach to inflation hedging that reflects the evolving
realities of global monetary instability. It calls for a reevaluation of hedging theory and practice in the era of
decentralized finance, where trust, technology, and transactionality redefine how individuals and households
respond to inflationary shocks. Future research must thus incorporate cross-regional models, real-time behavioral
data, and regulatory heterogeneity to inform both academic theory and practical financial strategies in inflation-
vulnerable settings.
Table 1 Comparative Metrics of Inflation Hedges
Asset Type
Return on
Investment (ROI)
Volatility
Liquidity
Accessibility
Cryptocurrencies
High (short-term),
volatile
Very High
High (esp.
P2P)
High (mobile-based
access)
Gold
Moderate to High
(long-term)
Low to
Moderate
Moderate
Moderate (logistics,
storage)
Real Estate
High (capital
appreciation)
Low (price),
Low (exit)
Low
Low (entry cost, legal
barriers)
INTERNATIONAL JOURNAL OF RESEARCH AND INNOVATION IN SOCIAL SCIENCE (IJRISS)
ISSN No. 2454-6186 | DOI: 10.47772/IJRISS | Volume IX Issue X October 2025
Page 8540
www.rsisinternational.org
Figure 4 Correlation Between CPI and Asset Returns (2018–2025)
The heatmap above illustrates the correlation between Consumer Price Index (CPI) inflation and asset returns—
Bitcoin, gold, and real estate—in Argentina, Venezuela, and Nigeria (2018–2025). It shows that Bitcoin tends to
have a moderately strong positive correlation with inflation in all three countries, particularly in Venezuela. Gold
shows consistent but weaker correlation, while real estate exhibits the lowest correlation, highlighting its relative
insulation from short-term inflation trends.
Figure 5: Investor Sentiment and Trust Drivers in High-Inflation Economies
This mind map illustrates the key behavioral and socio-psychological factors that drive investor preference for
cryptocurrencies in economically distressed settings. In environments marked by fiat currency distrust, digital
accessibility, and peer influence, crypto assets gain traction not solely due to returns but because they offer
perceived autonomy, resilience, and trust beyond failing traditional financial systems.
INTERNATIONAL JOURNAL OF RESEARCH AND INNOVATION IN SOCIAL SCIENCE (IJRISS)
ISSN No. 2454-6186 | DOI: 10.47772/IJRISS | Volume IX Issue X October 2025
Page 8541
www.rsisinternational.org
Figure 6 Regulatory Landscape Comparison Table
The comparative table above visually summarizes the regulatory landscape for cryptocurrencies across key high-
inflation economies. It categorizes legal status, peer-to-peer (P2P) allowance, exchange regulation, and tax
treatment using a color-coded matrix. Green-blue shades indicate more permissive or defined regulatory
environments, while darker or blanked cells highlight areas of restriction, ambiguity, or absence of formal
policy—useful for understanding crypto’s legal context globally.
POLICY IMPLICATIONS AND RECOMMENDATIONS
These results provide valuable implications for policy authorities, investors and scholars who are attempting to
understand the changing roles of inflation-hedging assets in high-inflation countries. More broadly, the increasing
popularisation of using cryptocurrencies as alternative stores of value requires a rethinking of traditional
regulatory, financial, and academic structures to accommodate this new normal of monetary behaviour in
inflation-ridden territories.
One immediate imperative for policymakers is to accept the calculus of cryptocurrencies as nascent vehicles for
hedging, especially in economies undermined by persistent inflation, devaluation of currency, or the breakdown
of trust in institutions. In countries such as Venezuela, Nigeria, and Argentina, there is evidence that average
citizens and small firms are moving in increasing numbers toward using cryptocurrency as a means of survival
and not necessarily as an investment vehicle due to the rapidly falling value of their local currencies (Trabelsi,
2022; Ibrahim & Osinubi, 2021). Efforts to repress this through broad based prohibitions or restrictions are
typically counterproductive, pushing transactions outside of formal systems and increasing financial exclusion.
Hence, authorities must establish flexible, open, and dynamic regulatory regimes that reconcile consumer
protection and innovation. Such clarification is conducive to investor confidence, systemic risk minimization and
the legitimate use of blockchain based solutions, while helping to control illicit activity (Yermack, 2022; OECD,
2023).
For investors and financial planners, this study serves as a reminder that cryptocurrencies should be part of a
broader inflation-hedging portfolio, not a diversifier or safe haven unto themselves. Due to their high volatility
and sensitivity to regulatory and market shocks they are not suitable as a lone hedge mechanism in long-term
planning. Nevertheless, while gold and real estate exhibit less volatility and more stability than cryptocurrencies,
accompanied by potential benefits in terms of portfolio diversification and return asymmetry, cryptocurrencies
can be an effective way to improve the diversification of a portfolio and to seek return asymmetry, notably in the
case of environments characterized by inflation (Bouri et al., 2020; Fang et al., 2023). Decisions about the level
INTERNATIONAL JOURNAL OF RESEARCH AND INNOVATION IN SOCIAL SCIENCE (IJRISS)
ISSN No. 2454-6186 | DOI: 10.47772/IJRISS | Volume IX Issue X October 2025
Page 8542
www.rsisinternational.org
of crypto exposure should also be matched to jurisdictional risk, access to liquid markets, regulatory oversight,
and investor capacity for risk. In economies with high penetration of P2P networks and stablecoins, planners
should also consider the digital easy access and literacy of clients for successful hedging execution.
The theoretical and empirical findings reported in this study indicate a number of areas for further research. There
is an evident and compelling call for empiricists to investigate the dynamic inflation-hedging ability of
cryptocurrencies in the national context beyond 2022 using the multivariate time-series models such as
Generalized Autoregressive Conditional Heteroskedasticity (GARCH) or Autoregressive Distributed Lag
(ARDL) frameworks. Such models can consider short- as well as long-run relationships and allow for volatility
clustering, which is important when it comes to understanding what happens to an asset during periods of high
inflation. Furthermore, research should investigate the hedging potential of stablecoins – especially those pegged
to inflation-resistant currencies such as the U.S. dollar – and consider their contribution to financial stability in
jurisdictions with low levels of access to formal banking services. Furthermore, the growing focus around central
bank digital currencies (CBDCs) provides a new frontier for research. With central banks experimenting with
and implementing digital currencies, the interaction with the narrative of inflation expectations, credibility of
monetary policy, and faith in fiat systems deserves systematic examination (Yermack, 2022; World Bank, 2023).
In conclusion, the evolution of cryptocurrencies as unofficial inflation hedges indicates a step-change in how
value is Regulators are required to rework their regulatory frameworks in order to try to capture the value of
digital assets while protecting the public sector. Investors and advisors should seek to deploy well-discipled,
diversified strategies that take into account the specific long-term and tactical attributes of cryptocurrencies but
do not unduly expose the portfolio to their risks. At the same time, scholars need to enrich their theoretical and
empirical knowledge of this the growing class, particularly in view of post-pandemic inflation patterns and the
digital revolution in finance.
Figure 7: Future Research Roadmap on Cryptocurrency and Inflation Hedging
This flowchart outlines strategic directions for future research on cryptocurrencies as inflation hedges. It begins
with post-2022 inflation modeling using ARDL and GARCH techniques, advancing toward the study of
stablecoins as low-volatility buffers, the regional stability impact of central bank digital currencies (CBDCs), and
ends with evaluating cross-asset portfolio dynamics for resilient inflation-hedging strategies in emerging
economies.
CONCLUSION AND RECOMMENDATIONS
Conclusion
This study critically examined the role of cryptocurrencies as potential inflation-hedging instruments in
comparison with traditional assets such as gold, real estate, and inflation-linked bonds. Drawing from empirical
INTERNATIONAL JOURNAL OF RESEARCH AND INNOVATION IN SOCIAL SCIENCE (IJRISS)
ISSN No. 2454-6186 | DOI: 10.47772/IJRISS | Volume IX Issue X October 2025
Page 8543
www.rsisinternational.org
analyses and region-specific case studies, the evidence reveals a nuanced and context dependent relationship
between cryptocurrencies and inflationary dynamics. While traditional assets particularly gold continue to exhibit
consistent long-term hedging performance, cryptocurrencies like Bitcoin and Ethereum display partial,
conditional, and time-variant inflation-hedging characteristics. These are most visible in high-inflation, low-trust
environments in the Global South where citizens confront currency devaluation, capital controls, and institutional
breakdowns.
Cryptocurrencies serve not as perfect hedges in the classical financial sense but as functional hedging tools and
monetary escape assets. Their decentralized architecture, ease of transacting across borders, and deflationary
design appeal to individuals in inflation-stricken economies. However, their extreme volatility, regulatory
ambiguity, and technological constraints undermine their ability to fully replicate the qualities of a reliable
inflation hedge. Moreover, access to these digital assets is influenced by local infrastructure, digital literacy, and
mobile payment ecosystems, which vary widely across regions.
This study affirms that hedging effectiveness must be evaluated not only through statistical measures of
correlation and regression but also through behavioral, institutional, and technological lenses. Consequently, the
theoretical lens underpinning this research draws from a hybrid of traditional financial hedging theory, behavioral
finance, and institutional economics. The findings challenge the prevailing assumptions in inflation-hedging
literature that assume uniform asset behavior across monetary regimes, highlighting the need for a more adaptive
and interdisciplinary approach.
Recommendations
Grounded in the study’s findings and theoretical framework, the following recommendations are proposed to
policymakers, investors, financial educators, and regulators:
Adopt a Context-Specific Hedging Framework
Regulators and financial advisors should recognize the variability in hedging performance across asset classes
and design inflation protection strategies that account for local realities such as currency volatility, digital
infrastructure, and institutional trust. A “one-size-fits-all” model is ineffective, particularly in emerging
economies where formal markets are thin, and informal digital asset usage is growing.
Enhance Digital Financial Infrastructure and Literacy
Governments and development partners should invest in the expansion of mobile payment infrastructure,
broadband access, and blockchain-based systems, particularly in rural and peri-urban areas. These investments
are critical for enabling broader access to digital assets and for ensuring their utility as inflation hedges. Financial
literacy campaigns should accompany these efforts to build public awareness on risk, volatility, and portfolio
diversification strategies.
Develop Regulatory Sandboxes and Balanced Crypto Frameworks
National financial authorities should explore the use of regulatory sandboxes to monitor and test the use of
cryptocurrencies in high-inflation environments without stifling innovation. Rather than blanket bans, nuanced
regulatory frameworks should be developed to balance investor protection, systemic stability, and financial
inclusion. Clear tax treatment, consumer protection, and anti-money laundering (AML) compliance measures
will support trust in the digital asset ecosystem.
Promote Portfolio Diversification Rather Than Substitution
Investors, particularly in inflation-prone economies, should view cryptocurrencies as complementary rather than
substitutive hedging instruments. They should be integrated cautiously within a diversified asset mix that includes
gold, inflation-indexed securities, and, where possible, real estate. This approach aligns with the non-linear, time-
varying nature of crypto-asset performance observed across empirical studies.
INTERNATIONAL JOURNAL OF RESEARCH AND INNOVATION IN SOCIAL SCIENCE (IJRISS)
ISSN No. 2454-6186 | DOI: 10.47772/IJRISS | Volume IX Issue X October 2025
Page 8544
www.rsisinternational.org
Support Cross-Disciplinary Research and Real-Time Monitoring
Academic institutions and central banks should promote research that integrates financial econometrics,
behavioral analysis, and institutional diagnostics to better understand the evolving dynamics of inflation hedging
in the digital age. Real-time data analytics and sentiment analysis tools should be developed to monitor shifts in
investor behavior, crypto adoption, and hedging effectiveness in inflationary episodes.
Incorporate Functional Hedging into Financial Inclusion Policies
Given the demonstrated role of cryptocurrencies as "monetary escape tools" in fragile monetary regimes, financial
inclusion strategies should not ignore the potential role of decentralized finance. Policies aimed at expanding
access to savings, payments, and remittance systems should incorporate regulated crypto-rails where feasible,
thereby enhancing resilience to inflation shocks for unbanked populations.
This study underscores that cryptocurrencies are not panaceas but are increasingly relevant in global inflation
discourse. Their evolution as partial hedging assets must be matched with strategic policy frameworks, informed
investor strategies, and robust empirical research tailored to the volatile and unequal terrain of the global financial
system. The future of inflation protection lies not in choosing between traditional or digital assets, but in
understanding how each can serve distinct roles within a resilient, inclusive, and adaptive financial ecosystem.
REFERENCES
1. Adesoji, O. S. (2021). The evolving role of cryptocurrencies in Nigeria’s monetary landscape. Central
Bank of Nigeria Occasional Paper Series, 45(2), 1–22.
2. Alquist, R., & Kilian, L. (2010). What do we learn from the price of crude oil futures? Journal of Applied
Econometrics, 25(4), 539–573. https://doi.org/10.1002/jae.1161
3. Bank for International Settlements (BIS). (2023). The crypto ecosystem: Key elements and risks. BIS
Annual Economic Report 2023. https://www.bis.org/publ/arpdf/ar2023e3.htm
4. Bekaert, G., & Wang, X. (2022). Inflation hedging for long-term investors. Journal of Portfolio
Management, 48(5), 80–97. https://doi.org/10.3905/jpm.2022.1.377
5. Blose, L. E., & Shieh, J. C. P. (1995). The impact of gold price on the value of gold mining stock. Review
of Financial Economics, 4(2), 125–139. https://doi.org/10.1016/1058-3300(95)90011-X
6. Bodie, Z. (1976). Common stocks as a hedge against inflation. The Journal of Finance, 31(2), 459–470.
https://doi.org/10.1111/j.1540-6261.1976.tb01899.x
7. Bouri, E., Jain, A., Roubaud, D., & Kristoufek, L. (2020). Cryptocurrencies as hedges and safe havens for
US equities: Evidence from the COVID-19 pandemic. Financial Research Letters, 38, 101845.
https://doi.org/10.1016/j.frl.2020.101845
8. CBN. (2023). Inflation and exchange rate trends in Nigeria: 2023 Statistical Bulletin. Central Bank of
Nigeria.
9. Ciner, C. (2001). Energy shocks and financial markets: Nonlinear linkages. Studies in Nonlinear
Dynamics & Econometrics, 5(3), 203–212. https://doi.org/10.2202/1558-3708.1095
10. Conlon, T., Corbet, S., & McGee, R. J. (2021). Are cryptocurrencies a safe haven for equity markets? An
international perspective from the COVID-19 pandemic. Research in International Business and Finance,
54, 101248. https://doi.org/10.1016/j.ribaf.2020.101248
11. de Wit, L., Bouri, E., & Roubaud, D. (2023). Inflation and safe-haven assets: Revisiting gold,
cryptocurrencies and real estate. The Quarterly Review of Economics and Finance, 89, 512–528.
https://doi.org/10.1016/j.qref.2022.12.005
12. Eross, A., McGroarty, F., Urquhart, A., & Wolfe, S. (2022). The intraday dynamics of cryptocurrency
volatility. Journal of International Financial Markets, Institutions and Money, 77, 101492.
https://doi.org/10.1016/j.intfin.2021.101492
13. Dyhrberg, A. H. (2016). Bitcoin, gold and the dollar – A GARCH volatility analysis. Finance Research
Letters, 16, 85–92. https://doi.org/10.1016/j.frl.2015.10.008
14. Fama, E. F. (1991). Efficient capital markets: II. The Journal of Finance, 46(5), 1575–1617.
https://doi.org/10.1111/j.1540-6261.1991.tb04636.x
INTERNATIONAL JOURNAL OF RESEARCH AND INNOVATION IN SOCIAL SCIENCE (IJRISS)
ISSN No. 2454-6186 | DOI: 10.47772/IJRISS | Volume IX Issue X October 2025
Page 8545
www.rsisinternational.org
15. Fama, E. F. (1970). Efficient capital markets: A review of theory and empirical work. The Journal of
Finance, 25(2), 383–417. https://doi.org/10.2307/2325486
16. Fang, J., Huynh, T. L. D., & Nasir, M. A. (2023). Do cryptocurrencies hedge against inflation? Evidence
from quantile coherency. Journal of International Financial Markets, Institutions and Money, 84, 101719.
https://doi.org/10.1016/j.intfin.2023.101719
17. Fang, L., Bouri, E., & Saeed, T. (2022). The role of investor sentiment in the safe haven capabilities of
cryptocurrencies during the COVID-19 crisis. Financial Innovation, 8(1), 1–23.
https://doi.org/10.1186/s40854-021-00299-z
18. Gyourko, J., & Keim, D. B. (2020). The behavior of real estate as an inflation hedge. The Review of
Financial Studies, 33(7), 3255–3280. https://doi.org/10.1093/rfs/hhz138
19. Ibrahim, M., & Osinubi, T. S. (2021). Cryptocurrencies and inflation hedging in emerging markets:
Empirical evidence. African Journal of Economic Policy, 28(1), 34–49.
20. IMF. (2023). International Monetary Fund (IMF). (2023). Global Financial Stability Report: Safeguarding
Financial Stability amid Inflation and Market Volatility. https://www.imf.org/en/Publications/GFSR
21. Islamoglu, M. (2016). The role of gold as a hedge against stock market volatility in Turkey. International
Journal of Economics and Financial Issues, 6(2), 504–509.
https://www.econjournals.com/index.php/ijefi/article/view/1842
22. Iqbal, N., Shaikh, M. A., & Ashraf, D. (2022). A comparative analysis of Bitcoin and gold as safe havens
against market volatility: Evidence from inflationary shocks. Economic Modelling, 114, 105984.
https://doi.org/10.1016/j.econmod.2022.105984
23. Lacoviello, M., & Navarro, G. (2019). Housing prices and inflation expectations. Board of Governors of
the Federal Reserve System. International Finance Discussion Paper No. 1256.
https://doi.org/10.17016/IFDP.2019.1256
24. Markowitz, H. (1952). Portfolio selection. The Journal of Finance, 7(1), 77–91.
https://doi.org/10.2307/2975974
25. Narayan, P. K., Phan, D. H. B., & Liu, G. (2022). Inflation hedging properties of cryptocurrencies: A new
empirical insight. Journal of Financial Stability, 58, 100966. https://doi.org/10.1016/j.jfs.2022.100966
26. OECD. (2023). Turkey Economic Snapshot 2023: Macroeconomic trends and risks. OECD Publishing.
27. Olayemi, A. O., Adeniran, J. O., & Afolabi, M. O. (2022). Cryptocurrency adoption and inflation hedging:
Evidence from African frontier markets. African Journal of Economic Policy, 29(1), 88–105.
28. Osinubi, T. S. (2021). Inflation and investor behavior in Nigeria: Evaluating real assets in high-volatility
periods. Nigerian Journal of Economics and Social Studies, 63(2), 115–132.
29. Schar, F. (2022). Decentralized finance: On blockchain- and smart contract-based financial markets.
Federal Reserve Bank of St. Louis Review, 103(2), 153–174. https://doi.org/10.20955/r.103.153-74
30. Shahzad, S. J. H., Bouri, E., Roubaud, D., & Kristoufek, L. (2019). Safe haven, hedge and diversification
for G7 stock markets: Gold versus Bitcoin. Economic Modelling, 87, 212–224.
https://doi.org/10.1016/j.econmod.2019.07.023
31. Trabelsi, N. (2022). Does Bitcoin hedge inflation in emerging markets? Evidence from dynamic
correlations. Journal of Risk and Financial Management, 15(3), 130.
https://doi.org/10.3390/jrfm15030130
32. Wang, Y., Wu, C., & Yang, L. (2021). Inflation hedging effectiveness of gold, TIPS, and REITs: An out-
of-sample analysis. The North American Journal of Economics and Finance, 56, 101365.
https://doi.org/10.1016/j.najef.2021.101365
33. World Bank. (2023). Global economic prospects: Navigating inflation risks. Washington, DC: World
Bank Publications.
34. Yermack, D. (2022). Bitcoin and central bank digital currencies: Coexistence or competition? Journal of
Financial Regulation and Compliance, 30(1), 44–58. https://doi.org/10.1108/JFRC-07-2021-0114