According to ChainCatcher, Zach Pandl, Head of Research at Grayscale, recently published an analysis on the impact of Federal Reserve policy on assets like Bitcoin. He noted that since the Iran conflict began at the end of February, U.S. stocks have risen 9%, while Bitcoin fell 1% and gold plunged 20%. Although AI-related large expenditures have supported the stock market, Bitcoin and gold have underperformed, largely due to market expectations that the Fed might raise interest rates to combat inflation.
Rate Hike Expectations Weigh on Bitcoin and Gold
Pandl pointed out that since the start of the Iran war, one-year Fed rate expectations have risen by about 60 basis points. About half of Fed officials believe a rate hike in 2026 could be appropriate, and the European Central Bank has already raised rates. As non-interest-bearing monetary assets, Bitcoin and gold compete with fiat currencies; when real interest rates on fiat currencies rise, the opportunity cost of holding Bitcoin and gold increases, thereby suppressing demand.
Grayscale disagrees with this market consensus. Its base case is that the Fed will pause rate hikes. If this judgment proves correct, Bitcoin prices could catch up with stock market performance. Pandl believes a lower probability of rate hikes would be positive for Bitcoin.
Bitcoin's Dual Role in Portfolios
Pandl also elaborated on Bitcoin's unique role in investment portfolios. On one hand, Bitcoin is a scarce digital commodity that can serve as a long-term store of value. On the other hand, it is a public blockchain asset that provides exposure to the long-term growth of the crypto industry. Therefore, Bitcoin functions similarly but not identically to gold and growth stocks. If rate hike expectations cool, consistent with Grayscale's base case, Bitcoin could see a catch-up rally.