What this gold pattern could mean for Bitcoin if the FED raises rates?

Bitcoin is trading north of the $40,000 price with bullish momentum over the past 24 hours. Today, the US Federal Reserve (FED) is expected to begin its monetary tightening policy.

Related literature | TA: Bitcoin Breaks $40K, Key Upside Break Suggests Trend Change

The financial institution could increase interest rate hikes and slowly draw liquidity from global markets. Bitcoin and risk-bearing assets, such as stocks, are expected to turn bearish. So far, the price of BTC has not lived up to expectations.

At the time of writing, Bitcoin is trading at $40,416 with a gain of 4% on the last day.

BTC with bullish momentum on the daily chart. Source: BTCUSD trading summary

Bitcoin has behaved on its own with resilience to a potential shift in US dollar monetary policy. In the step of trading as a stock, the price of BTC seems more akin to the price action of Gold (XAU).

The precious metal recently broke above $2,000 but has bounced back on some of its gains. This downtrend could be short-lived and could predict what’s to come for gold and Bitcoin. Two different assets are sometimes traded under the inflation hedge story.

Senior Commodities Strategist for Bloomberg Intelligence Mike McGlone indicated that the FED last hiked rates to 25 bps or 0.25% in 2015. Gold came off a multi-year downtrend that started in 2011.

The precious metal saw appreciation rise after the global economic crisis of 2008, but as markets began to recover, investors began to scale back gold holdings. As can be seen below, 2015 was the last time in the past decade that the gold price bottomed out around $1,000.

Source: Mike McGlone via Twitter

Gold began an upward move, as McGlone noted, the “next day” after the FED announced the start of another tightening cycle. The current inflationary environment, with the risk of a protracted war in Europe, could fuel another gold rally and Bitcoin could follow.

Bitcoin on a Tightening Cycle

In any case, Bitcoin could continue to disappoint traders waiting for the $20,000 low. The cryptocurrency has been valuing a favorable environment since 2020, according to the pessimistic traders.

However, the XAU/BTC chart shows that Bitcoin has risen over the past decade, despite or because of the monetary policy of the FED.

Gold/BTC is trending downward on the daily chart. Source: XAUBTC Trading View

The short-term reaction to the FED’s announcement could hint at what the price of BTC will do in the coming months. As Coin-Crypto has reported, cryptocurrencies could appreciate if the financial institution hints at a less aggressive monetary policy.

Related literature | Bitcoin Value Takes a Blow as US Inflation Rises

According to analyst TedTalksMacro via Twitter

Fed up 25 basis points today, risky assets (BTC, stocks) higher on the news. Powell hints at the press conference that more gains will follow (4-5 per EOY) – how the market will move during/after the press conference will be determined by whether it’s a mild or aggressive walk. Dovish walk will be indicated by some mention of caution during the press conference. An aggressive hike will be signaled by any intention to continue raising/tightening rates despite negative effects on economic growth!

Leave a Comment