Can Bitcoin Protect Against Inflation? A Case Study of Argentina and Turkey

Abstract

Persistent double-digit inflation, sharp currency depreciation, and eroding confidence in domestic monetary institutions have led many households in emerging markets to search for assets outside the control of national authorities. Bitcoin, the largest cryptocurrency by market capitalization, is frequently described as "digital gold" and a potential inflation hedge, yet empirical evidence remains mixed, particularly for chronically highinflation economies. This paper examines whether Bitcoin functions as an inflation hedge in Argentina and Turkey, two emerging markets characterized by persistent inflation, currency depreciation, and divergent cryptocurrency regulatory regimes, over the period January 2018 to August 2025. Using monthly data on local-currency Bitcoin returns, changes in inflation, and exchange-rate depreciation obtained from TradingEconomics.com, the study estimates baseline and extended Ordinary Least Squares (OLS) regressions for each country. The baseline results show a statistically insignificant, negative relationship between inflation and Bitcoin returns in Turkey, and a small but statistically significant positive relationship in Argentina. Once exchange-rate depreciation and global Bitcoin returns are introduced as controls, the explanatory power of both models rises sharply (R² ≈ 0.99 in each country), while the coefficient on inflation becomes negligible and statistically insignificant in both cases. These findings suggest that Bitcoin behaves primarily as a currency-depreciation hedge and a vehicle tracking global cryptocurrency market sentiment, rather than as a direct hedge against domestic inflation. The results carry implications for investors, policymakers, and households evaluating Bitcoin's role in high-inflation, capital-constrained economies.