Research: Bitcoin’s Relationship with Interest and Ounces of Gold

Cryptocurrency market made a strong start to 2023. While the mixed data from macroeconomic growth confuses investors, the majority of experts agree that the FED will end the rate hike in the coming months.

In this article, we will share with you Bitcoin. FED interest rate and competitor ounce of gold Let’s see how he acts against it.

How FOMC Meetings Affect Bitcoin

The Fed’s next FOMC (Monetary Policy Committee) meeting will take place on 1 February. At this meeting and with the 25 basis point interest rate increase on March 23, the experts said that the funding rate will increase. 4.75% – 5.00% waiting for it to rise. The next main scenario is based on the fact that the interest rate remains constant until the last quarter of the year.

With the Fed’s weekly funding rate based on historical data bitcoin It has been moving in the opposite direction for the last 3 years.

COVID-19 With the start of the pandemic, the world economy came to a standstill. The Fed lowered interest rates to zero to keep the wheels turning. With the loose monetary policy, 2020 and 2021 passed with rally in crypto.

Access to finance has become much easier as a result of zero interest. Then, as the rate at which money is spent increases, inflation problem arose. The end of the pandemic led central banks to return to tight monetary policy again.

With the rise in interest rates, which are guaranteed returns, investors turned away from crypto. We witnessed a full bear market in 2022.

Today, however, we see that inflation has receded in the USA. For this reason, the market is pricing in the fact that the FED will stop the rate hike. Investors should keep in mind that interest rates will remain high for a while, even though January is a festive season.

Bitcoin Moves Parallel With Its Rival

The ancestor of cryptocurrencies is seen as the biggest competitor of gold due to its limited supply and being a secure virtual asset. Although there was not much connection between the two assets in the past years, ounce of gold and BTC started to move in parallel with the entry of institutional investors into the crypto market.

According to the data of the last 1 year, the correlation coefficient between ounce gold and Bitcoin reached 0.83. This situation reveals that the price of Bitcoin is now directly related to the world norms.

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