Prices keep rising but bitcoin still isn't behaving like the inflation hedge it is said to be

• Inflation concerns were further stoked Tuesday when the CPI saw its largest one-month increase in 13 years.
• Yet bitcoin, widely viewed as a hedge against inflation, dipped lower after the CPI reading.
• Some bitcoin bulls, however, maintain that the cryptocurrency will prove its use as a hedge against rising prices.

Inflation concerns were stoked on Tuesday when consumer prices between May and June saw their largest one-month increase in 13 years, but bitcoin, often touted as a hedge against a weaker dollar, failed to respond in kind.

US stocks dipped at the open, while bitcoin was flat and then steadily dropped over the course of the morning and early afternoon. The price of the world's largest cryptocurrency by market capitalization was lower by about 2%, below $33,000 for most of the day following the announcement of the CPI figures.

The asset was trading at $32,854 as of 1:10 p.m. ET Tuesday.

This has happened with past readings, as well. In May, bitcoin fell 7% on a day when CPI data showed prices rising at their fastest rate since 2008. Theoretically, with higher inflation, demand for assets that can serve as alternative stores of values to cash would rise - bitcoin among them.

"Bitcoin isn't behaving like an inflation hedge anymore and will continue to remain heavy over expectations over higher yields," Ed Moya, senior equity analyst at foreign exchange firm Oanda, said in a Tuesday note.

That inflation is viewed as transitory, however, could be a reason why the June report wasn't enough of a catalyst to break bitcoin's sideways trading, Moya added.

Bitcoin has long been heralded as a hedge against inflation mainly due to its finite 21 million supply of coins. The idea is that bitcoin serves a similar purpose to gold in protecting against reckless fiscal policies that devalue fiat currencies.

Billionaire investor Mike Novogratz once said bitcoin's value has increased because governments are printing money like "toilet paper."

Some bitcoin bulls, however, maintain that the cryptocurrency will still prove its purpose one day.

"Bitcoin is still a hedge for inflation in the long run for most investors," John Wu, president of Ava Labs, the team behind the altcoin avalanche, told Insider.

He continued: "However, given the amount of new investors in the space, there are investors that think of it as a risk asset and those incremental investors may be selling in the short term as a source of fund."

Bitcoin's price has been rangebound since a broader cryptocurrency crash in May.

But it seems that the digital asset is holding firm at its $30,000 support level the more it gets tested, Julius de Kempenaer, senior technical analyst at technical analysis platform StockCharts.com, told Insider.

"As a result, an eventual break below this level will become more and more meaningful," he said. "If and when this happens, $20,000 is on the cards as the next level of support to watch."