Theoretically, bitcoin could be a strong inflation hedge. Assets that investors run to in times of rising prices—so-called safe-haven investments like precious metals and real estate—are ones that are scarce or move counter to paper money or financial assets. Bitcoin fits the bill. The problem is, bitcoin hasn't much of an investment history: Created in 2009, it's only been actively traded for a decade or so, and inflation hasn't been much of a factor for most of its short life. So no one really knows how inflation will affect bitcoin and its characteristically volatile behavior. Certainly, its performance has been puzzling vis-a-vis inflation of late. Bitcoin doubled from mid-December 2020 to early January 2021, as inflation started to heat up. But then, with no apparent easing of inflationary pressures, between Jan. 8 and Jan. 11, it lost 25% of its value. In May 2021, inflation talk intensified: As the Federal Reserve signaled a retreat from easy-money pandemic policies and a rise in interest rates, stocks trembled—but bitcoin really tumbled. On May 19, it culminated a month-long slide by closing at $38,390—a 41% decline from its peak of $64,829 in mid-April.