Topic: Help me understand this apparent contradiction between bitcoin and inflation (Read 440 times)

The result of inflation is the short term effect the price of bitcoin because that time the total ecomomic situation was unstable. In the middle of 2023 the inflation of us was high that time bitcoin rate gradually in less the regular price.

In this situation US government taken some of decision like interest rate of 3.11 percent on its debt and continuing an upward trend in interest rates.When US Treasury bond yields rise, international investment in that country increases and the currency strengthens.Bitcoin price rise inflation of hedge between.

In my view, in the short term, inflationary pressures may trigger market panic and lead to a decline in Bitcoin prices as investors may prefer more stable assets. However, in the long run, Bitcoin appears more favorable during periods of high inflation due to its limited supply and decentralization. Thus, in times of rising inflation, the price of Bitcoin may begin to rise, despite a temporary dip in the short term.

Inflation in my country like yours causes the value of foreign currencies to increase massively. I can easily estimate if I compare the value of my country's money to the dollar ratio ten years ago. In 2014 one dollar was equal to 70 taka in my country but now one dollar is equal to 125 taka which is about 200 percent inflation. Earlier in my country the prices of daily necessities were within the purchasing range of peopleBut currently due to inflation people are out of purchasing power. But if transactions are done through Bitcoin, then I think it will be possible to reduce the amount of inflation to a large extent. As bitcoin is not legal in my country it is not possible to deflate inflation with bitcoin for now.

That's basically what happens, OP is right and it happens and he thinks it doesn't. Inflation goes up, bitcoin price goes up as well. In fact, during 2021 bull run, inflation was high due to pandemic as well, one of the reasons why we peaked so high was the inflation too.

Stock market goes up during that time as well, since inflation goes up, the value of fiat goes down, which means you have "more money" but in reality you also have the same money because the money you have while may look higher, it also can buy the same things since everything went up. This is why it's quite important to make sure that people know what they are doing with these type of investments and do not really end up with any trouble on the long run.

In my country, when inflation goes up, all foreign currencies, including the USD, go up. That means our native currency value has dipped due to inflation. So it's expected that the Bitcoin price will also rise when inflation increases. And due to the volatile behaviour of Bitcoin, it would rise more compared to foreign currencies. Usually, when inflation increases, we search for more income sources. As a result, those who are familiar with Bitcoin begin to accumulate it, causing the Bitcoin price to rise even further.

Inflation cannot affect the price of bitcoin in the way you are expressing it. If you hold bitcoin, you are somehow against inflation because the money you use to buy the bitcoin if you keep the money in your bank, inflation will affect the value of the money as it will not worth what it worth now if the inflation rate is, but if you hold bitcoin and the bitcoin pump, it will maintain its value and even add more value which is clearly against inflation.
Long term bitcoin investment is the best.

The main fault in the way people see it as inflation hedge and then get surprised by sudden ups and downs is that people who trade stocks also trade bitcoin and treat it like a stock, or a commodity.
If all stocks and commodities get hit by central bank's policies, so is bitcoin because people who invest in stocks get hit and have to sell everything they own, which includes cryptocurrencies.

If bitcoin was limited to being traded by normal people on exchanges and there was no demand from institutions you'd see much less stock correlation, but both average and top price would also be much lower. It's either this or that. You can stay in your little sandbox that bitcoin used to be in when the only exchange available worldwide was Mt.Gox, but then you'd still have low liquidity and would have to convert to USD first before you could buy bitcoin.

I believe the Bitcoin on the other hand is affected by an economic breakdown.  It may look like Bitcoin resist when inflation hits the economy but the longer this inflation surge stays, the more noticeable the effect of it on Bitcoin.  This kind of effect is hidden by the high volatility nature of Bitcoin because people think that the sudden drop of Bitcoin is normal because of its high volatility being a decentralized nature.  As one of the replies stated, having an economic breakdown decreases the capability of people to buy Bitcoin, and if they have Bitcoin, they might tend to sell it to make up for their financial shortage, thus the bitcoin market will have more supply than demand lowering its market value.


But what about if it goes the other way around?  If someone bought Bitcoin last 2021 when the market is at its peak then we can say that the logic you stated can't be applied to that situation. So I believe bitcoin being a hedge against inflation is situational.

Bitcoin is at the verge of decentralized currency with the potentialities of fluctuating known as volatility which the value of the currency goes UPs and DOWNs with the statistics of instabilities value rate.
The inflation in Bitcoin is an occurance based on when the supply is increasing over time. Apparently, the inflation nature of Bitcoin is not affected as a caused of economic breakdown such as that which has effect on the stock and the real estate investments.

I'm going to try and explain it this way. Imagine 10 years ago you had $5,000 and you decided to save in a bank. Based on inflation rate today, the 5k will not have enough purchasing power because commodities are on the high side. But if you'd bought Bitcoin with 5k in 2014 at $1000, you'd have 5 BTC which in today's market value should be around $235,000. So bitcoin is seen to be an edge over inflation in long term because as the price of commodities are increasing, the price of Bitcoin is also increasing.

The main point is that Bitcoin volatility is still much higher than any fiat inflation, so there can be no short term inflation-hedge feature of Bitcoin yet. The whims of the market vastly override even the 9% US inflation from a year ago. 9% on an annual basis is nothing compared to even the monthly volatility of Bitcoin, sometimes the weekly volatility of Bitcoin!


Right now Bitcoin is a long-term inflation hedge. This is specifically because it has a capped supply while inflationary currencies of course do not. And really, until Bitcoin is a very mature asset, perhaps a few decades from now, it's not going to be a short term inflation-hedge. Volatility of Bitcoin being an emerging global currency and savings/investment asset is going to be far higher than any fiat inflation (other than in hyperinflationary currencies). Only once Bitcoin is a more boring investment, with huge 4 year bull/bear markets gone, with everyone accepting Bitcoin as a normal currency, and therefore Bitcoin volaility will be a tiny fraction of what it is today, will it possibly be able to be used as a shorter-term inflation hedge. Until then, it's just a very quickly growing volatile asset whose own internal market pressures are much larger than the pressure of any fiat inflation can be.

Even though in theory it is true, every now and then you need to see how Bitcoin was when Corona happened and there you will determine how Bitcoin can create a different narrative from existing theories.

This is not like seeing the hedging process that many people mean for bitcoin there are definitely times when the market plays a role in rising and falling prices.
Of course, this is short-term performance and almost all products traded will experience the impact of inflation and not just bitcoin. But in bitcoin we see a real recovery process after the market performance becomes worse and people judge the hedging due to bitcoin's strength in self-defense.

Well, the one that makes stocks and Bitcoin prices go down because The FED raising interest rates will make investors interested in changing their risk asset to traditional currency to enjoy the interest rate. No wonder risk assets and Bitcoin will go down but not for the long term, It's normal because when the price goes down lots of people will buy at the low price from the assets eventually it will make the price go up little by little after the interest rate cut more whales will be entering the market again. 

Technically Bitcoin is inflationary because the miners mines Bitcoin and it make the circulation supply increased, it's no longer inflationary if the circulation supply capped to 21 Million. The difference is, money has no rule to print out new money while Bitcoin has a rule and everyone can know how many Bitcoin will be mined for every four years.

But, theoretically the Bitcoin's maximum supply could be changed, as long as majority developers accept the proposals.

Inflation and Bitcoin are two completely opposite things. Inflation is a central issue and is controlled by a third party. Inflation occurs when supply is increased along with supply. Here it does not depend whether the price rises in the market or not but only if both demand and supply become uncontrolled then inflation occurs. But inflation in the case of BitcoinThere is no chance of that happening because it is a decentralized currency and its control system is not over any third party who can influence supply and demand. The total supply of Bitcoin is 21 million. In this case, no matter how much we increase the demand for Bitcoin, there is no way to increase the supply, so there is no possibility of inflation in the case of Bitcoin.

I think there are no significance or relationships between bitcoin and inflation. Inflation is an event where the prices of anything that can be brought are getting higher and higher, so the cost of living is also getting higher or more expensive. While bitcoin is a digital or decentralised currency wherein its price is based on how many people invest in it or how many people do trades a day, you see the price drops and ups depending on the current situation. In past events or days, the price of bitcoin suddenly dropped, but not too deeply. But this is a common happening in bitcoin. Right now, the price of bitcoin got into 43k, which means it goes up. In summary, the price of bitcoin can't be affected by how high or low inflation is in a country. As long as bitcoin has investors and has demand, the price will keep on increasing.

Bitcoin is a hedge against inflation in the sense that, no matter how the value of a particular currency drops and your savings in fiat lose value, your savings in Bitcoin will not lose its value. Even if it loses its value, it will rise back up.

Inflation in a single country may not necessarily affect Bitcoin Price because Bitcoin is a global currency while that country's currency only affects that currency. Whatever is affecting Bitcoin significantly has to affect the global economy or a lot of players in the Bitcoin community.

If you save your money in a flat for two years, the value will drop because the value of the currency will depreciate. The reverse may be the case with Bitcoin.

That is the thing that makes it very confusing for many people, because bull run is shorter whereas bear run is longer. We have seen 2021 as a peak, that's true and saw 68k on October 2021, that was the last peak. Do you know how long the increase took? I mean we are still not above ATH so we are still not at peak, and that means the last peak was about 5-6 months, and the bear run was for 2+ years, that alone is proof enough that many people see only the bad side.

However, if you see how much it increases, you will see that it is not that bad and it is doing fine. I just hope that we are going to end up with something that will end up with a lot better result, it has to be something that needs to be considered longer to handle.

Money flow is key for growth of any market and we witnessed its importance during Covid-19 pandemic. It was expected to cause serious problems on global markets but because of massive QEs from FED and many central banks, massive money flows created and all markets skyrocketed months after appearance of pandemic. It went oppositely to all early anticipation but it can be explained by money flow.

Inflation was created during pandemic but it helped to increase money flow in all markets. People felt more easily and comfortably to spend their money, they invested and contributed to make many markets soared in two years.

Nope, inflation doesn't suppress the prices of risk assets. The attempts to fight inflation(interest rate hikes) are what suppresses the prices of risk assets. Inflation means having excessive amounts of fiat money in circulation, which causes the prices of everything to go up. Certain
assets like Gold, Real Estate and probably Bitcoin are being viewed as a "inflation-protection" assets, because they preserve their value in times of inflation. This means that their value/price does up with the same ratio as the level of inflation. In the short term, the Bitcoin price determined by the demand for Bitcoins, not by the overall inflation levels.

No asset follows inflation perfectly, look at real estate, real estate is an asset that historically follows inflation, but like any other asset it has its own dynamics and it can move independently from it.

Bitcoin is the same, during the pandemic the inflation all over the world grew, and while bitcoin at the beginning went down in price, eventually it recovered and even now is way above its price before the pandemic, so I would say that even if bitcoin is not a perfect hedge against inflation, it does a good enough job if you ask me.

That's the thing. Bitcoin is highly volatile, and it just usually decline during the start of inflation because we can't stop people from panicking during the early stage of inflation. There are people panicking, selling Bitcoin because they need to use it to buy their essential goods. And because of inflation, people tend to hoard goods that can last for a month or longer. When you buy that, you need more fund for big purchases. That's why some tend to sell what they are holding. And that's the reason why at some point Bitcoin can be affected by inflation. But after the panicking stage, you would see changes in the price since people have already adjusted.

The problem with Bitcoin is really the extreme nature of price swings. If you invest 1 Million USD in Bitcoin now  to buy a house in 5 years time, you have no idea what the price of Bitcoin will be in 5 Years in USD maybe double what you paid or maybe only half of it..... If you really need cash in USD at a specific point in time, Bitcoin can cause you some issues..

Think of Bitcoin kind of like digital gold. People buy gold to protect against inflation, right? It keeps its value when regular money might lose it. Some folks see Bitcoin the same way - a shield against inflation because there's only so much of it and no one controls it. But here's the catch - Bitcoin's price jumps around a lot more than gold. So while it could be good against inflation, its rollercoaster prices make it a bit of a wild card.

As someone already said, it is not inflation that cause the price to go down but it is market demand. Bitcoin as now still used by few percentage of population, and mostly as speculative asset. Other asset like gold doesnt experience many crash because it is already used by more people and more use than just speculative asset so they bring more stability to the price

That is basicly the job description for a lot of people working in the financial industry

Well, it's a well known fact Bitcoin adoption increases in determined regions where inflation is out of control. We have already seen it in Venezuela, Nigeria and more recently in Argentina. However, such markets don't have potential to leverage Bitcoin's price too much, so we don't see a big difference in BTC price. There are other major events happening in the world which can influence BTC's price much more than adoption in high inflated countries.

Another situation is what we have seen in the USA during the bearish crypto market, when interest rates were being raised in order to try controlling inflation. It had a negative impact on crypto market, as investors took their funds out from crypto to invest in other niches through traditional markets.

The reading I make of this, is that even when the financial situation of a country looks pretty bad, there are always people profiting from it somehow. Where some see a problem, others see an opportunity. If big players spot a profitable alternative outside crypto industry, they don't mind dumping it to the bottom in order to take advantage of something else. And once the alternative they went for isn't that profitable anymore, they just bring their funds back to crypto and pump it again. For these people who really impact the market with their orders, it's mainly about seeing inflation as an opportunity to speculate and make extra profit.

It doesn't work like that in a decentralized digital network like bitcoin, inflation is an entirely different thing and doesn't affect the way bitcoin operated in its decentralized way.


this is by our mere ordinary saying with mouth, which is obviously far from the way it works, there are different as bitcoin is inflation proof and there's not how we can compare the two together.


but what if not, the reverse is the case for them both.

Okay, it's time to get real for a moment.

US inflation peaked at about 9% annually during the post-pandemic economic disruption, and is now down to something like 4%.

Bitcoin has fluctuated by about 300% in the last two years.

Bitcoin is a "hedge against inflation" in the same was that betting on horses is a "hedge against inflation". This might be true in some narrow context, but not in the way people generally use that terminology.

When the dust settles, anywhere you put your money is an 'investment' which includes US dollars, Bitcoin, cryptos, land, gold, shares of AAPL, baseball cards, or anything else you think people might find more valuable in the future than they do now.

The price of bitcoin is not effected by bitcoin but people can take help from it during inflation, to maximise his earning to handle the expenses during inflation. The actual things which effect the price of bitcoin is the wrong or true information which are spreading all around the globe as well as the demands for bitcoin.

It can be possible that if demands for bitcoin increase then price of bitcoin will increase no matter this happen during inflation or not. May be once there happend these situations when during inflation price of bitcoin was reduces but I don't think that all the time it happens because bitcoin is not controlled by anyone and it goes ups and downs irregularly.

Oversimplified way is to see what's happened with the US dollar (since it's what Bitcoin's popularly priced). To curb inflation, the US raises interest rates. In the short term, this encourages investors to shore up more wealth in the dollar, high interest rates make it attractive, more so than Bitcoin.

Long term, interest rates either don't hold, or doesn't hold up to inflation.

Let's take a 1 year vs 10-year look. $100 in 2013 but with 5% PA interest rates is $105. So even if something cost 3% more in 2014, it's still a pretty good gain, something not likely with Bitcoin. But over 10 years, inflation probably outstrips interest over the period. Bitcoin, however, performs very well over 10 years -- there's your hedge.

Now use almost any other currency in the global South and you'll see an even wider gap between interest and inflation. Argentina recently put up  interest rates to beyond 100%! Sounds great to double your money in a year, but inflation has overtaken it by many degrees.

also something to consider is the "Timeline" of the Bitcoin market. If we zoom in on any
day or week the chances are there will be a short term trend downwards but if we
zoom out its plain to see that the Bitcoin market is on an upward trajectory.

Why? because of what franky1 posted, Bitcoins 4 year cycle and the built in halving
of the supply every 4 years. This alone is a contributing factor to Bitcoins deflation and
is the opposite to what governments do to try and control inflation - print more and more FIAT.

you have to understand that the increase or decrease in Bitcoin prices does not depend on inflation, but market demand for it or when there is positive or negative sentiment; these things will affect the price of bitcoin directly. but why do people say that bitcoin is an asset that is resistant to inflation? You can see the history of bitcoin, starting from the year it was first launched until now, the price trend has increased significantly and it has beaten global inflation, which is what makes people say that bitcoin is an asset that is resistant to global inflation.

I've found this article to be helpful when it comes to the op's question. It mentions that Bitcoin can actually go up when fiat inflation is on the rise because of people trying to save their money from devaluation that comes with fiat inflation. But it also explains the idea behind the prices of assets and perhaps cryptos as well going down in price, as a reaction to US Fed policies. For more info on that, I suggest this article. Basically, the idea is that when the Fed lower interest rates, it makes borrowing money cheaper and encourages investments, and vice versa (although the article says that the assets tend to lose value, apart from those in the financial sector). So these are just tendencies, it doesn't always work like that. And Bitcoin is different from typical assets, so it doesn't always correlate with what happens to the stock market in general.

OP, it was more the Fed interest rate raises that suppress Bitcoin's price than inflation.

First, you need to understand that any short term movements in the price of any asset is purely based on the psychology of market participants. This overrides fundamentals when we're talking short term, but of course fundamentals are the primary driver of long term growth. Hence why Bitcoin has a big crash every four years despite its fundamentals making it obvious that its price is going to be much much higher in the future. The market doesn't have very good long term sight.


Add to that the fact that most people don't even know what Bitcoin is. Even lots of people IN the bitcoin market don't understand that it is hard money. Lots of people just consider it something akin to a high-growth "risky" tech stock, heck sometimes I still see articles refer to Bitcoin as a stock lol. And what do people do with "risky" investments when the Fed raises interest rates? They dump them. Why do they dump them? Because borrowing gets more expensive as interest rates go up, so companies generally do less borrowing, and therefore take on fewer business growth plans while interest rates are high, which means less expected growth in the near to medium term future. Hence why stocks fall when interest rates go up. Of course Bitcoin is not a stock and is not one bit affected by interest rates. But as I already, most people don't understand what Bitcoin is, and in fact they think it is basically a high-growth risky tech stock. So that's how they treat it as an investment, and they dump it on interest rate raises even though those raises have no effect on Bitcoin.


Yes inflation of USD makes Bitcoin more valuable, but the market psychology of the moment is going to override that in the short term. And even more so the response to high inflation - high interest rates - drive Bitcoin's price down because people treat Bitcoin (right now) like something it is not, like a risky tech stock rather than a very non-risky hard currency. Of course long term if inflation stayed high we would indeed see that positive effect on Bitcoin's price. But if we're talking about just a year or two of high inflation (as we saw in real life recently) that's a short term scale, and the inflation wasn't high enough to really affect Bitcoin's price. If it had been hyper inflation then we definitely would have seen the result in a vastly increasing Bitcoin price because then people would be dumping the hyper inflating currency to get into one that isn't - Bitcoin.



Just always remember, asset markets are driven entirely by the psychology of market participants. In the short term it is very reactionary, driven by fear and greed and this overrides fundamentals. In the long term, fundamentals of the asset smooth out the fear and greed of the market and become the primary driver for growth (or collapse or stagnation) of an asset.

Nope Bitcoin value won't get impacted a lot by inflation but surely in short term it will get affected to some extent. The main reason for that short term value drop of Bitcoin can be because of worldwide inflation, when inflation takes place all over the world then fiat will lose its value and those people who hold Bitcoin might end up selling some of their holdings if they need cash and that causes Bitcoin's value to go down.

But, after that short term value drop Bitcoin won't lose its value again by a lot, however Bitcoin is known to be volatile and it can still sometimes get those dips of value. When inflation gets hugely high and people hardly manage to fulfill their daily need then again Bitcoin price won't go up a lot. However, Bitcoin won't lose as much value as fiat currencies will lose, and that's why you can consider it as deflationary in such times.

I appreciate this question and observation, and the answer is not far-fetched at the same time. What I realise is that people overrate Bitcoin, and this is for obvious reasons, the coin has survived well during thick and thin moments over time and it has moved in thousands from where it started. But people forgot that the Bitcoin of 2010 is not the Bitcoin of now, the price is so high now, that there is no way it can effectively hedge inflation as they say. If you buy your Bitcoin today, you might not see it higher than x2 in the next 2 years. But what if inflation is worse than that in your country? The inflation we talk about too depends on the country we are talking about, and like in my country, inflation is "worst" now. To the extent that if there is anything that can be more qualifiable than worst, that is what I would use it for.

Let me give you a clue. In the last 3 years, the price of commodities has grown between 5-8 times what they used to be due to inflation. Can Bitcoin help me to stabilise it even if I bought the coin 3 years ago? That is not possible. If the inflation is more bitting than how the value of Bitcoin appreciates, it will not be able to hedge anything, though it may try, but it could be futile. This can be worse if it is the bearish season of Bitcoin. You could imagine those who bought Bitcoin when it was at $60,000 in the view that it is a hedge against inflation. By now, it would have been worse for them because, the inflation in their country would be bitting, while again, the Bitcoin they invested in which was supposed to be the hedge against the inflation is still losing their money. What a double punishment!

This means that what people mostly say about Bitcoin is not true, they are only overemphasing on the general saying. This is practical.

bitcoin has its own economic time table of deflation which is based on a market cycle of 4 years..

FIAT time tables of inflation are based on 3-6-12 months between each government budget report

bitcoin does not peg or shadow a fiat. so they dont resemble each other economic policy or fud reports

When the prices of goods and services increase, wallets are drained and consumers' purchasing power decreases due to this factor. Due to this situation, the value of the currency will decrease.
Bitcoin supply is 21 million, no more and no one can plan to reduce. When inflation rises, Bitcoin also experiences a decline in the short term, but in the long term, Bitcoin is able to survive as a better asset.

The two sources below can be used as references to make things easier.
1. Bitcoin and inflation: Everything you need to know
2. Inflation and Deflation of Price and Money Supply

So when inflation kicks in, it can initially make people jittery about risky investments like Bitcoin. Short term it might dip but some people see Bitcoin as a kind of inflation-proof stash over the long haul. Limited supply and its decentralized vibe make it appealing as a store of value, which could lead to growth over time. So yeah it might go down at first, but some see it as a winner in the long run

If I would describe it in my terms, I will say it this way - When Inflation comes up, people find it hard to invest money and most of the times are left with no money as prices of their daily needs increases compared to the previous term, so this kind of affect any asset and it also affects Bitcoin. Less buyers, Less Demand, Supply keeps growing.

Bitcoin is deflationary as it has a capped amount of coins 21mil. Supply is limited to this amount. As demand increases it will push prices up because of this fixed supply - in the long term.

When interests rates rise and the price of commodities increase people and companies are discouraged from borrowing and generally the whole economy has less to spend. Thus people and institutions are less likely to spend money on high risk assets like Bitcoin driving down demand during this period of high interest rates. Thus price decreases.

But yes in the long-run a Bitcoin will increase in value - deflationary. Whereas other fiats will ‘lose’ their individual value over time - inflationary.

FED, central banks create inflation when they need to print money to have money flow in economy. Then they 'find' solutions to control inflation, it's a joke.

Bitcoin is inflationary too, you must know this fact first. It is not deflationary like many people believe it is.

Bitcoin will become deflationary after 2140 when all 21 million bitcoins in total supply will be mined all by miners and available in circulation. There are some contributors for its deflationary like people lost their bitcoins like losing private keys, can not spend because of dust UTXOs, lost to scam exchanges and sent to wrong addresses ...

Price goes up because value of Bitcoin goes up with time, with more adoption, more use cases, more utility, more legality.

 I am just an amateur, so I am not claiming special knowledge:

As far as I know the relation between Bitcoin price and interest rates is:

Lets assume you have 1 million USD and are looking for a return of 10 % per year, you have invested in shares, bonds and real estate, nothing fancy, no Bitcoin because you consider it too risky with prices going up and down.

Now the interest rates go down, means people can easily borrow more money and because of more demand the prices are going up - means more inflation. The lower interest rate means some of your investments make a lower return. In total you maybe make only 8% per year now.

In order to improve your return you now buy Bitcoin because there is a chance to make more profit, and you are prepared to accept a higher risk in regards to Bitcoin.  So mor edemand for Bitcoin- Bitcoin prices go up....

After some time with inflation the interest rates will be set higher, to make it harder to borrow money, and less money is chasing the same amount of good, means the inflation rate goes down. But the higher interest rate means also you can now make the target 10% return on your 1 million, without holding any #risky#  Bitcoins.

So demand for Bitcoins goes down, and therefore the Bitcoin price goes down because of lower demand.

To sum it up: Inflation / lower interest rates  drive Bitcoin up     Higher interest rates drive Bitcoin down....


But there are of course other factors going into the Bitcoin price...... so this is just about inflation / interest rates.....

In Europe the target inflation rate is 2 %, so over many years inflation will add up of course....

Theoretically, Bitcoin goes up when there is inflation and people conceive it as a hedge. However, this is not always the case, at least not in the short term, because there are people who view it as a luxury asset. And when inflation hits the pocket, and these people need money, then the first to withdraw is their luxuries.

That being said, on the long term it has acted as more than a hedge against inflation. Strictly speaking, though, that does not count as evidence of a long-term inflation hedge either. It does have good chances to work, though, I believe.

Ideally in the minds of many, that should be the case but since we are not living in a perfect and flawless world, there are things that are subject to realities in the market and that also includes Bitcoin since it is traded in an open market like we have right now and to which anyone can freely participate in the process. Now, the idea that Bitcoin is a hedge inflation is coming from the fact that it has a limited - a fixed number of coins as against the limitless printing of fiat money as to be decided by central bankers and the government. As we have seen in the history of Bitcoin, I think it is playing that part in most of the time though it does not mean the price of BTC would not go down as, again, it is subject to the market forces moving around.

This most times are biased based on your location, but when it come to global economy what makes Bitcoin price some times falls along side with the inflation is likely as a result of monetary policies taken by the federal reserve which in turn tightens the whole situation for investors and as such Bitcoin price may not or may fall only for some time (very short period) before it then makes a price correction.

Let's say, it's because after some short period of tight monetary policies (regulations) the Bitcoin price tends to correct itself against the inflation and with investors finding solution around the situations the market will begin to set forward with it's activities and with that little price fall some investors has a taken advantage of it through buying the dips and the demand for Bitcoin increases over time so the price sky rockets for a long period.

Infact as we know Bitcoin is volatile, so after some depreciation what next is appreciation. so soon after the inflation must have cost a little price fall the next thing is price increase and it tends to last for a long time.

If there is inflation, the price of goods and services will increase as the fiat of the nation decline in price. Assuming bitcoin is stagnant and not moving up or down in price (but which is not possible), the price of bitcoin will rise against the specified fiat. But bitcoin is a volatile asset which can make this not known to most people.

You always hear the pundits saying that the rise of inflation suppresses the price of risk assets such as stocks and bitcoin, as interest rates are pushed up in an attempt to control inflation.

But if bitcoin is a hedge against inflation then shouldn't the bitcoin price rise when inflation goes up instead of going down?
I'm guessing the answer would be that inflation causes bitcoin price to go down in the short term, but in the long term causes it to go up? If so then why?