How does Bitcoin work as a hedge against inflation?

cnbctv18.com:

Inflation is on the rise once again. Here in India, the annual inflation rate has been on the increase for five straight months, and it's a similar story in many parts of the world. As such, people are looking for ways to protect their savings from the devaluing effect of inflation, and cryptocurrencies like Bitcoin offer a seemingly perfect solution.In the short time that it has been around, Bitcoin has worked well as a hedge against inflation.

It has delivered burgeoning returns and is even being referred to as digital gold. This harkens back to when gold was one of the only commodities people used to protect themselves from the reducing purchasing power of fiat currency.But why is Bitcoin being touted as a hedge against inflation, and can it really offset the diminishing value of fiat currencies? Let’s find out.Understanding inflationIn a nutshell, inflation refers to the rising prices of goods and services. When prices rise, the purchasing power of the masses diminishes.

As a result, more fiat currency is required to purchase goods or services that you would have bought for a lesser amount in the past. For example, a chocolate bar sold for 20 rupees two years ago is selling for 30 rupees today. This is due to inflation.There can be various macro and micro reasons for inflation in an economy.