The inflation hedging properties of cryptocurrencies

When the inflation rate increases, the purchasing power of individuals diminishes. In the worst cases, it can make it virtually impossible to save up money for later consumption. This being said, cryptocurrencies are growing in interest and also being adopted all around the world. Especially in countries with high inflation rates and unstable economies, individuals seem to turn to cryptocurrencies to hedge the inflation. Implementing the Fama and Schwert (1977) methodology based on the Fisher theory (1930), the inflation hedging capabilities of the cryptocurrency index CRIX is analyzed for the USA, Eurozone, Turkey, and Argentina. The regression coefficients show different results, depending on the country and its respective inflation rates. Nevertheless, all the regression coefficients are statistically not different from zero, at a p-level of 0.05. The results show that the CRIX index cannot function as an inflation hedge since the significance of the coefficients was not at an acceptable level.