The market expects the Federal Reserve to end interest rate hikes soon, which could have bullish implications for Bitcoin, gold and stocks.
However, the implications for gold and, by extension, for Bitcoin are largely bullish. If the Fed plans to start lowering interest rates and the inflation levels stay elevated, it leads to negative real interest for investors. The earning rate is less than the inflation rate and is, therefore, repressive. Financial repression works more smoothly than raising taxes or cutting spending, but it brings losses for bondholders.
The latest Bitcoin rally has seen a rising correlation with gold and a dip in its correlation with the S&P 500 index. Bitcoin and gold are moving in lockstep with a correlation coefficient value of one compared to a low proportional relation of 0.13 with the S&P 500 index.Bitcoin is benefiting from the narrative around a, strengthening its position as a non-correlated asset like gold.
While the outcome for stock markets hangs in the balance due to inflation risks, gold is expected to shine in the medium term. Given the positive correlation with gold, Bitcoin may also benefit from the macroeconomic setting.
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