Gray: If the Federal Reserve pauses interest rate hikes, Bitcoin may see a rise

Grayscale's research director Zach Pandl stated that if the Federal Reserve pauses interest rate hikes, Bitcoin may see an increase. Since the start of the Iran war at the end of February, U.S. stocks have risen by 9%, while Bitcoin has fallen by 1% and gold has dropped by 20%. Although significant spending related to AI has supported the stock market, Bitcoin and gold have underperformed, partly due to market expectations that the Federal Reserve may raise interest rates to combat inflation. Grayscale disagrees with this expectation, believing that the basic scenario is that the Federal Reserve will pause interest rate hikes. If correct, Bitcoin's price may catch up with stock performance.

Zach Pandl noted that since the start of the Iran war, the one-year Federal Reserve interest rate expectations have risen by about 60 basis points, with about half of the Federal Reserve officials believing that a rate hike in 2026 may be appropriate. The European Central Bank has already raised interest rates. As a non-interest-bearing monetary asset, gold and Bitcoin compete with fiat currencies, and an increase in real interest rates will raise the opportunity cost of holding Bitcoin and gold, thereby suppressing demand.

Bitcoin has a dual purpose in a portfolio: on one hand, it is a scarce digital commodity that can serve as a long-term store of value; on the other hand, it is a public chain asset that can provide exposure to the long-term growth of the cryptocurrency industry. Therefore, Bitcoin's function in a portfolio is similar but not entirely equivalent to that of gold and growth stocks. Zach Pandl stated that if the likelihood of interest rate hikes decreases, aligning with Grayscale's basic scenario, Bitcoin may catch up with stock performance.