Grayscale: Bitcoin Could Withstand New Rate Hikes from the FED

Grayscale indicates that the impact of rates is not uniform across crypto assets. Bitcoin could face a different environment than in 2022 if the upcoming rate hikes are limited. Future decisions by the Federal Reserve (FED) regarding interest rates may affect the digital asset market less than the monetary tightening cycle of 2022-2023. Grayscale suggests that one or two additional rate hikes during 2026 would not necessarily change the capital allocation towards cryptocurrencies. The FED raised its benchmark rate by 25 basis points on September 16, reaching a range of 3.75%-4%, marking its first increase since 2023. Inflation remains high, and the measure aims to accelerate its return to the 2% target. The FED's projections suggest a median of 4.1% for the federal funds rate by the end of 2026, implying an additional increase of 25 basis points. Zach Pandl, head of research at Grayscale, notes that the key difference lies in the magnitude of the adjustment, interpreting the September hike as a mid-cycle adjustment. Grayscale compares the current situation to March 1997, when a 25 basis point hike did not stop the advance of the Nasdaq. The impact will depend on the duration of elevated rates; persistent inflation could lead the FED to maintain a restrictive policy for a longer time. Additionally, higher rates could benefit stablecoin issuers and make products like tokenized bonds more attractive.

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