Although obviously not as dramatic as crypto, gold has had huge drops and multi year bear markets, but it's still considered an inflation hedge. The housing market has had huge dips too.
Neither is as volatile as crypto, but my point is no asset has a guarantee that its value won't "drop randomly", simply not possible. Inflation was positive during the real estate crash of '08 and during multiple gold bear markets. If your time horizon is long enough, a volatile asset can still be a good inflation hedge.
2008 was a period of deflation. Of course inflation hedges would drop, when inflation was negative.
Oil, housing, car prices all dropped at that time. Prices dropped so low that companies like General Motors went bankrupt.
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We face an opposite problem today. Prices are going up. Old established companies love this, they can sell their stuff at higher prices. Aka, inflation. Turns out crypto was terrible at hedging this scenario.
You're right I stand corrected on '08, but if look at the 6m chart on a real estate index now it also seems like a bad inflation hedge. On the flip side, if you looked at crypto or real estate in November they seemed like amazing inflation hedges.
Most assets have tanked in the last couple months, so it's sort of misleading to single out crypto.
You especially can't be an inflation hedge if you drop while inflation goes up.