Bitcoin rally could catch up to stocks if the Federal Reserve holds off on rate hikes, Grayscale forecasts.
The underperformance of Bitcoin amid Iran war has turned into a fed rate question, according to Grayscale, which argues that the trade may reverse if the central bank keeps its policy unchanged rather than tightens.
In a June 22 note, Grayscale head of research Zach Pandl said U.S. equities have risen 9% since the start of the Iran war in late February, while Bitcoin is down 1% and gold is down 20%.
As Pandl argues, Bitcoin and gold have lagged partly because investors now expect the Fed to raise rates to fight inflation:
“We disagree with those expectations. Our base case is for the Fed to hold off on rate hikes. If we’re right, Bitcoin’s price may catch up with stocks.”
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Rate Bets Pressure Bitcoin
Pandl said one-year Fed rate expectations have risen about 60 basis points since the start of the Iran war, while about half of Fed officials think hikes may be appropriate in 2026.
But Bitcoin doesn’t pay interest, so higher rates can make cash and government debt more attractive than non-yielding assets such as Bitcoin or gold, the analyst argues.
- For context, the European Central Bank has already raised rates, adding to the pressure on non-interest-bearing assets.
Grayscale said Bitcoin still has a dual role in portfolios, acting both as a scarce commodity and as exposure to long-term crypto industry growth, making it’s function similar “but not exactly the same” to that of gold and growth equities in portfolios, Pandl wrote.
But BofA Sees Three Hikes
But Grayscale’s view runs against a more hawkish call from Bank of America, where economist Aditya Bhave now expects three Fed rate hikes before the end of 2026, one each in September, October and December.
That would raise the federal funds rate to 4.25% to 4.5%, about 25 basis points above current market pricing and three months earlier than traders expect.
Bank of America said inflation has “gotten unambiguously worse,” while stronger labor-market data has made last year’s rate cuts harder to justify.
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