Bitcoin may be positioned for a catch-up rally if the Federal Reserve refrains from raising interest rates, according to Bitwise Chief Investment Officer Matt Hougan. Since the start of the Iran conflict in late February, U.S. equities have gained roughly 9%, while Bitcoin has slipped 1% and gold has fallen 20%. Hougan noted that the divergence comes as investors increasingly price in the possibility of tighter monetary policy amid inflation concerns, with one-year Fed rate expectations rising about 60 basis points.

Hougan argued that markets may be overestimating the likelihood of future rate hikes. While the Fed left its current benchmark federal funds rate unchanged at a range of 3.5% to 3.75%, Bank of America predicts rates to be raised by 75 basis points before the end of 2026. "Our base case is for the Fed to hold off on rate hikes," Hougan said. "If we're right, Bitcoin's price may catch up with stocks."

Because Bitcoin and gold do not generate yield, higher interest rates increase the opportunity cost of holding those assets relative to cash and bonds, weighing on demand. Over the past month, Bitcoin's price has fallen roughly 19%, extending its three-month decline to about 13%. While AI-related spending has fueled gains in equities, Bitcoin and gold have lagged partly due to fears that central banks will need to tighten policy further to combat inflation.

Unlike gold, Hougan views Bitcoin as serving two functions within portfolios. He described Bitcoin as both a scarce digital commodity that acts as a long-term store of value and a public blockchain network that provides exposure to growth in the broader crypto economy. That combination gives Bitcoin characteristics of both gold and growth equities, potentially making it an attractive portfolio diversifier. "Bitcoin can act as a portfolio diversifier that, at current levels, appears attractively priced," Hougan said.

BlackRock Managing Director Robert Mitchnick stated that artificial intelligence investment is diverting capital away from Bitcoin, contributing to a 20% slide in the cryptocurrency's value over the past month. Mitchnick argued that the weakness evident since October is not due to crypto-specific issues but rather a broad rotation into AI-centric assets. He noted that traditional inflation hedges like gold are experiencing similar pressure as investors prioritize AI exposure in both public and private markets.

"The AI momentum is certainly sucking a lot of the oxygen out of the room," Mitchnick said, describing the current market environment. He pointed to US fiscal deterioration as the primary catalyst likely to reverse this trend. Mitchnick expects debt and deficit concerns to resurface as the 2026 midterms approach, identifying rising fear over government borrowing and money printing as the single most important fundamental driver for Bitcoin over the next year, alongside interest rate movements.

Technical indicators suggest further downside

Bitcoin is currently trading down 4% over the past 24 hours, having broken below a rising channel that formed from the June 5 capitulation lows near $59,000. This technical breakdown marks the third time this year that Bitcoin has attempted to break such a channel, following similar patterns in January and May that preceded deeper market flushes.

The Relative Strength Index (RSI) stands at 36.44 and is declining, yet it has not reached the extreme oversold levels observed in February and June that previously triggered price bounces. This suggests there may be more room for the price to fall before market exhaustion sets in. A full bearish Exponential Moving Average (EMA) stack, ranging from $65,001 to $77,530, remains firm resistance overhead.

Market analysts indicate that reclaiming the channel and the 20 EMA at $65,001 would be necessary to resume a recovery toward $68,767. Conversely, losing the daily low at $61,862 opens the path for a direct retest of the $59,000 June lows.