Bitcoin hit another record high and is approaching the $69,000 mark for the first time, after inflation data bolstered the argument that cryptocurrency is a hedge against rising cost pressures.

The largest digital asset by market value rose 1.9% to $68,991 on Wednesday, topping the previous high set late Monday night in New York trading. Ethereum, the second-largest cryptocurrency, has set another high, hitting $4,863.

The rise of the token can be attributed, at least partly, to the fundamental argument, which has been gaining momentum in recent months, that Bitcoin can act as an inflation hedge. Crypto backers argue that, unlike dollars or any other traditional currency, the digital coin is designed to have a limited supply, so it cannot be devalued by the government or central bank distributing too much of it.

Sui Chung, chief executive of CF Benchmarks, said: "Bitcoin continues to enjoy the rally that began in August and accelerated through September and October. The latest leg of its rally began in anticipation of the October launch of a Bitcoin-futures ETF, but "seems to now be fueled by the sustained inflation that we are witnessing across all the worlds major economies."

Prices for everything from food to gas and housing rose faster and were more stable over the past few months than many economists had expected. US consumer prices rose last month at the fastest pace since 1990, cementing high inflation as a sign of a pandemic recovery and reducing purchasing power even as wages rose.

Major Wall Street players said they bought the coin or were interested in it because of the inflation-hedging thesis. Their argument is supported by the fact that gold, usually seen as a hedge against inflation, has underperformed in recent months while Bitcoin has advanced.

However, others argue that it does not have a long enough history to prove that it can act as an inflation hedge. Cam Harvey at Duke University has made this argument in the past, saying that theoretically, if investors come to regard it as something similar to gold, Bitcoin might hold its value for a very long time - as in a century or more. During his research on gold, he found that it has held its value for thousands of years. He also discovered that it is prone to manias and crashes over shorter periods.

Matt Maley, chief market strategist for Miller Tabak + Co., says that a lot of investors are looking at it as an inflation hedge, but he's not convinced that it will work out well.

"I'm not saying it won't - I just think gold has worked as an inflation hedge for centuries, so people should use gold in combination with Bitcoin as a hedge," he added.

According to data compiled by Bloomberg, the spot price of gold has fallen by 1.8% this year, while bitcoin has risen by more than 130% over the period.

JJ Kinahan, chief market strategist at TD Ameritrade, said: "People are looking for places to put their money. It's hard to say if it's an inflation hedge or not because we haven't lived through inflation with cryptocurrencies. It's one of those things where everyone thinks it will be, but time will tell."