How Will Today’s Fed Decision Impact Bitcoin And Gold?
Bitcoin and gold have frequently been compared, and with good reason.
Both have functioned as safe-haven assets or “disaster hedges” during times of crisis, gaining value as global markets responded to macroeconomic and geopolitical turmoil.
As a result, one might wonder how the two will react should the Federal Reserve (Fed) announce a rate hike this afternoon, as many believe it will.
[Ed. note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]
After polling several experts, the consensus is that any increase in the Fed’s benchmark rate will have little impact on Bitcoin.
However, a rate hike could have an influence on the price of gold.
Bitcoin Marches On
Bitcoin, the world’s largest digital currency by market value, marches to the beat of its own drum, driven by variables that are unique to this particular asset.
“Bitcoin will move on its idiosyncratic factors” in the short-term, said Arthur Hayes, co-founder and CEO of Seychelles-based cryptocurrency exchange BitMEX.
Mati Greenspan, senior market analyst for social trading platform eToro, offered a similar perspective.
“Bitcoin is largely disconnected with any traditional markets and bears absolutely no connection to interest rate outlook at this time.”
“People are buying BTC for all kinds of reasons,” said Jeff Bishop, CEO of RagingBull.com.
“When you have an asset moving 10%+ in a week on a regular basis, you don’t really consider if the Fed causing 10-year interest rates to over 3% as a major concern,” he added.
Tailwinds For Gold
While an increase in the Fed’s benchmark rate will likely not impact Bitcoin, it could very well affect gold, several analysts said.
Will Rhind, CEO of GraniteShares, commented on how such a development could bolster the precious metal, stating that “An interest rate hike this week should be good for gold.”
Kirill Radchenko, CEO of Paygine, an open blockchain financial platform for fintech and crypto business, offered similar input, stating that:
“We would agree on how this change should affect Gold prices.”
However, other market observers emphasized that the relationship between a Fed rate hike and gold’s price may be a bit more complex.
“Gold has historically been used as a hedge against inflation, against purchasing power risk, however, gold prices usually drop against a strengthening dollar, and that’s what will likely happen if the Fed raises the target rate 0.25%, as it is expected to,” said James Song, founder and CEO of blockchain startup ExsulCoin.
David Johnson, CEO of Latium, offered a different explanation of the factors that will likely drive gold’s price movements going forward.
“Gold should continue to move up due to risk aversion from capital markets and diminishing global stimulus.”
He added that “Bitcoin should to move up due to increased clarity from regulators as it moves into a more defined asset class.”