If you invested in Bitcoin as a hedge against inflation, you might just be underwater right now. 
According to data from Glassnode, a crypto analytics firm, an estimated 40 percent of Bitcoin holders are in the red, as the world's largest cryptocurrency plunged to $30,000 per coin on Monday. The digital asset is down more than 50 percent from its all-time high in 2021. 
Most strikingly for those who have championed Bitcoin as a kind of "digital gold" that could weather bouts of high inflation, the cryptocurrency has moved practically in tandem with the broader stock market sell-off. 
Bitcoin's price has played follow-the-leader with growth stocks since at least January, but the correlation has tightened in recent weeks as the bear market has intensified. Now its 30-day correlation with the tech-heavy Nasdaq index is at an all-time high
This suggests that Bitcoin is feeling the same pressure from tightening financial conditions as the rest of the stock market, as the Federal Reserve continues to raise its benchmark interest rates in a full-court press to curb rampant price increases across the economy.  
"Financial conditions are tightening, which puts pressure on risk assets, and for better or worse Bitcoin and Ethereum are treated as risk assets," Tom Dunleavy, a senior research analyst at research firm Messari, told Cheddar. 
While some crypto-enthusiasts had pushed back against the narrative that Bitcoin is just another risk asset in the past, many are coming to terms with the fact that Bitcoin may just be along for the ride for this latest round of financial turbulence.  
"Many crypto enthusiasts, and Bitcoiners in particular, like to believe blockchains will supply an alternative financial reality when the world goes to hell, but it's clear that's not (yet) the case," wrote Jeff John Roberts, executive editor of Decrypt, in a recent column. "Crypto is as prone to macroeconomic shocks as everything else."
Bitcoin-bull Mike Novogratz, CEO of Galaxy Digital, which is a heavy investor in the crypto space, also recognized the link between cryptocurrencies and the stock market this week. 
“Crypto probably trades correlated to the Nasdaq until we hit a new equilibrium,” said Novogratz during an earnings call. “My instinct is there’s some more damage to be done, and that will trade in a very choppy, volatile, and difficult market for at least the next few quarters before people are getting some sense that we’re at an equilibrium.”
This is a far cry from Novogratz's comments during a blockchain conference back in March when he said that Bitcoin's primary use case was as a hedge against "really bad fiscal stewardship.” 
Arcane Research said the correlation stems from the "institutionalization of Bitcoin," in which bigger investors have placed Bitcoin into the same bucket as other riskier investments.  
Dunleavy said he's doubtful that institutional investors, like pensions and hedge funds,  are already selling off their holdings. He points to a more specific event playing out right now in the crypto-sphere as the reason for the selling pressure. 
Over the weekend, algorithm-based stablecoin Terra broke its one-to-one peg with the U.S. dollar, falling as low as $0.67. To shore up the peg — which is the whole reason stablecoins are able to function as they do — the Luna Foundation Guard, the nonprofit that backs Terra stablecoin, sold off a large chunk of its Bitcoin and other crypto holdings. 
Regardless of where selling pressure is coming from, Bitcoin is clearly not behaving as an inflation hedge in the short-term, said Dunleavy. 
"I don't think anyone seriously considers Bitcoin an inflation hedge in its current instantiation," he said. "It's many things, and most of those things right now are risk assets."  
The U.S. Dollar, meanwhile, is on a bull run, as currency traders pump up the global reserve currency in anticipation of more Federal Reserve rate hikes.