Goldman Sachs Says Bitcoin Will be More Exposed to FED Rate Hikes

Goldman Sachs analysts explained, "Over the last two years, as Bitcoin has seen wider mainstream adoption, its correlation with macro assets has picked up." 

Goldman Sachs released a research paper on Thursday highlighting Bitcoin's increased sensitivity to interest rate hikes by the Federal Reserve. Zach Pandl, co-head of foreign exchange strategy at the bank, and FX analyst Isabella Rosenberg said that Bitcoin's vulnerability to Fed policy will grow with Bitcoin usage.

They explained: “Over the last two years, as Bitcoin has seen wider mainstream adoption, its correlation with macro assets has picked up.” 

Recently, technology stocks have been affected by higher bond yields, with the NASDAQ 100 index falling more than 13% this year. 

Analysts further said: “Bitcoin and other digital assets have likely suffered from the same forces … These assets will not be immune to macroeconomic forces, including central bank monetary tightening.”

The FED is expected to raise interest rates five times this year. According to Goldman Sachs, the FED could hike interest rates at every meeting this year. The Federal Open Market Committee (FOMC) did not offer a precise schedule for the increase in its post-meeting statement last week. However, there are signs that it might happen in the March meeting. 

Goldman Sachs analysts further commented: “Over time, further development of blockchain technology, including applications in the metaverse, may provide a secular tailwind to valuations for certain digital assets.”

Goldman Sachs projected earlier this month that Bitcoin might hit $100,000 as the cryptocurrencies continue to take gold's market share. Meanwhile, UBS, Switzerland's largest bank, has predicted a crypto winter in the wake of FED rate hikes and regulatory changes. However, it is still up 9.8% for the year. 

According to a recent report by Crypto.com, the number of crypto owners is likely to surpass 1 billion this year.