June 22, 2026
Since the start of the Iran war in late February, US equities are up 9%, Bitcoin is down 1%, and gold is down 20% (see chart). While heavy AI spending has bolstered stocks, Bitcoin and gold have lagged partly due to expectations that the Fed might raise rates to head off inflation. We disagree with those expectations. Our base case is for the Fed to hold off on rate hikes. If weโre right, Bitcoinโs price may catch up with stocks.
Since the start of the Iran war, 1-year Fed rate expectations have risen ~60bp and about half of Fed officials think it may be appropriate to hike rates in 2026.1 The European Central Bank has already raised rates. As non-interest-bearing monetary assets, gold and Bitcoin compete with fiat currencies. Higher (real) interest rates on those currencies raise the opportunity cost of holding Bitcoin and gold, which, in turn, can weigh on demand.
We believe that Bitcoin serves a dual-purpose in portfolios: a scarce digital commodity held as a long-term store of value and a public blockchain offering exposure to secular growth in the crypto industry. That makes Bitcoinโs function similarโbut not exactly the sameโto that of gold and growth equities in portfolios. If so, Bitcoin can act as a portfolio diversifier that, at current levels, appears attractively priced.
Key Takeaway: Bitcoin and gold have underperformed stocks since the start of the Iran war due, in part, to expectations for tighter Fed monetary policy. But if rate hikes become less likelyโin line with our base case scenarioโBitcoin could potentially catch up to stocks.
Exhibit 1: Equities, gold, and Bitcoin performance since start of Iran War
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