- Bitcoin trails US stocks since the Iran conflict, with equities up 9% and BTC down 1%.
- Fed rate expectations rose 60bp, while nearly half of officials back hikes in 2026.
- Grayscale says Bitcoin could close the gap with stocks if the Fed avoids new rate hikes.
Grayscale Research predicts Bitcoin is poised to rally and close its performance gap with US stocks if the Federal Reserve avoids further rate hikes in 2026. Since the Iran war began in late February, Bitcoin has fallen 1% while equities have gained 9%.
Higher real yields have weighed on non-yielding assets like BTC, but Grayscale still views it as a hybrid gold-tech diversifier with strong rebound potential under a less hawkish Fed environment and improving liquidity conditions.
Bitcoin Underperforms U.S. Stocks Since Iran War Began
Since the outbreak of the US-Israel-Iran conflict on February 28, 2026, BTC has lagged behind U.S. equities as investors navigated geopolitical tensions, shifting monetary policy expectations, and resilient performance in technology-driven stocks.
According to Grayscale, U.S. equities are up 9%, fueled largely by continued heavy spending in the artificial intelligence sector. In contrast, BTC has posted a modest decline of around 1%, while gold, a traditional safe-haven asset, has dropped sharply by 20%.
Fed Rate Hike Expectations Fuel Risk-Off Pressure on BTC
Rising Federal Reserve rate hike expectations have intensified risk-off sentiment across cryptocurrency markets, contributing to BTC’s underperformance versus U.S. equities. Grayscale notes that one-year Fed rate expectations have climbed by about 60 basis points, signaling a more restrictive policy outlook that weighs on speculative digital assets like BTC.
Roughly half of Federal Reserve officials now support potential rate hikes in 2026 amid persistent inflation pressures linked to higher energy costs from Middle East tensions. With policy rates held at 3.50%–3.75%, the hawkish shift has lifted real yields, increasing the opportunity cost of holding non-yielding assets such as BTC and gold.
The European Central Bank has also tightened policy, raising its deposit rate by 25 basis points to 2.25%, its first hike in nearly three years. This global tightening trend reinforces risk-off flows, underscoring BTC’s sensitivity to interest rate expectations despite its long-term diversification appeal.
BTC Outlook: Fed Pause Could Trigger Catch-Up Rally
BTC is well-positioned for a rally if the Federal Reserve pauses further tightening. Reduced rate hike fears would ease valuation pressure, allowing BTC to benefit from post-2024 halving scarcity and increasing institutional adoption through ETFs and corporate treasury allocations.
Meanwhile, Grayscale continues to frame BTC as a hybrid asset, combining gold-like scarcity and monetary premium with growth exposure to the expanding crypto and blockchain ecosystem. This positioning strengthens its appeal as both a store of value and a long-term portfolio diversifier in macro transitions.
At press time, BTC trades at $62,029.89, down 4.61% in 24 hours. BTC sits close to key support between $60,000 and $62,500, with analysts watching for a potential base formation and a “catch-up” rally if broader markets stabilize and liquidity conditions improve.
Related: Bank of America Predicts Three Fed Rate Hikes as Inflation Persists
Disclaimer: The information presented in this article is for informational and educational purposes only. The article does not constitute financial advice or advice of any kind. Coin Edition is not responsible for any losses incurred as a result of the utilization of content, products, or services mentioned. Readers are advised to exercise caution before taking any action related to the company.
