This thesis investigates the conditions under which Bitcoin functions as an inflation hedge in economies characterized by institutional fragility and monetary instability. While Bitcoin is often discussed in speculative or universal hedging terms, this study emphasizes that its role is highly context-dependent. Drawing on theories of inflation-induced financial underdevelopment, financial repression, and the breakdown of financial intermediation, the analysis examines whether Bitcoin’s hedging behavior emerges specifically in environments marked by institutional fragility and macroeconomic instability. The empirical strategy includes a dual-method approach: simulation models assess Bitcoin’s performance in preserving real purchasing power across different wage scenarios, while regression analysis tests the relationship between inflation and Bitcoin returns across four country cases, Argentina, Nigeria, Turkey, and the Euro Area. The findings suggest that Bitcoin outperforms local currencies in preserving purchasing power across all contexts, but its statistical behavior as an inflation hedge is limited to countries with institutional breakdown, most notably Argentina. These results indicate that Bitcoin serves as a hedge or capital preservation tool primarily in contexts where formal financial institutions fail. The study concludes that Bitcoin’s economic role is not universal but conditional, activated in environments where citizens lack access to stable monetary systems and are incentivized to seek decentralized alternatives. In such settings, Bitcoin becomes not just a speculative asset but a rational instrument for value protection.