Bitcoin Could Start A Catch-Up Rally—But The Fed Has To Play Ball, Bitwise's Matt Hougan Says
Bitwise CIO Matt Hougan suggests Bitcoin could rally if the Fed holds rates steady and inflation fears ease. He argues markets overestimate tightening policy, noting Bitcoin has lagged equities due to higher opportunity costs from potential rate hikes. If the Fed maintains current levels, capital may rotate back into Bitcoin, which Hougan views as an attractively priced portfolio diversifier combining store-of-value and growth characteristics.
Bitcoin (CRYPTO: BTC) 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%.
In a "The Stack" post on June 22, Grayscale Head of Research Zach Pandl noted that the divergence comes as investors increasingly price in the possibility of tighter monetary policy amid inflation concerns.
One-year Fed rate expectations have risen about 60 basis points, while roughly half of Federal Reserve officials believe rate hikes could be appropriate in 2026, Hougan noted.
The European Central Bank has already moved to raise rates.
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%.
Why Bitcoin Could Benefit
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,” he said. “If we’re right, Bitcoin’s price may catch up with stocks."
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.
If those concerns ease, capital could rotate back into alternative assets such as Bitcoin.
Bitcoin’s Dual Role
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.
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