The Fed vs. Risk: Why Bitcoin, Gold, and Stocks Are Falling Simultaneously
The main catalyst for all risk assets has shifted sharply. Geopolitics in the Middle East has given way to a hawkish turn in Federal Reserve rhetoric. After the new Fed Chair Kevin Warsh took an uncompromising stance, the financial world reacted instantly. The market has not only stopped pricing in a rate cut—it has begun actively factoring in a rate hike.
The US dollar has already hit a yearly high. The S&P 500 index is steadily heading toward its fourth consecutive red weekly candle. Gold and silver are undergoing a notable correction, while SpaceX shares have plunged 30% from their peaks. Capital is now flowing en masse into government bonds.
The logic behind this move is simple and based on a reassessment of market risks. When the cost of money rises, companies' future cash flows are discounted at a higher rate. This primarily hits growth stock valuations, especially in the tech sector, which was heavily inflated by cheap credit. Capital senses such changes about a quarter in advance.
The drop in oil prices is not a reason for joy, but a clear symptom of an economic slowdown. For the Fed, lower commodity prices no longer offset stubbornly rising service prices. Gasoline in the country is getting cheaper, but services, insurance, and rent continue to rise. Core inflation has firmly taken hold, so the regulator is talking about hikes to suppress demand.
Factors of Asset Attractiveness
The main argument in favor of bonds is a positive real rate. The nominal yield on short- and medium-term securities is at multi-year highs. Accordingly, the real yield becomes anomalously attractive for major players. The reasoning that it's better to earn in stocks is a common fatal mistake. Why take on the risk of a 20% correction in the S&P 500 when a risk-free instrument offers guaranteed returns?
Gold clearly loses out in this scheme for the same reason. The asset does not generate a stable cash flow. Therefore, when real yields rise, the opportunity cost of holding it becomes prohibitively high.
Additionally, the traditional end-of-quarter effect comes into play. Large funds need to lock in profits in overheated assets and show clients a stable result. The safest way to do this is to shift into fixed-income instruments. I associate this rotation scenario with the actions of Goldman and JP Morgan. JP Morgan itself needs to rebalance a $165 billion portfolio by June 30. That's why stocks, gold, and crypto are all falling simultaneously right now. The first thing to do in such a situation is to actively hedge with shorts.
Scenarios for Gold and Bitcoin
Over the next few months, I expect the Fed to maintain a pause. The first rate hike, if it happens at all, will come no earlier than September. This means short-term yields will remain high, and capital will continue to flow into bonds. Metals will trade in a range with downside risk. If the market believes in multiple rate hikes, gold could be sold down to $3000. However, a crash is not expected due to ongoing purchases by global central banks.
For gold, I am not opening a short from current levels. Instead, I am waiting for a local bounce to gradually build a position: the first entry around $4250 (25% of position size), a second accumulation zone near $4400 (another 35%), and a final addition around $4500 with signs of buyer weakness. The level for a full cancellation of the entire bearish scenario would be a price close above $4600. I plan to take profits in stages.
For bitcoin, the calculation relies entirely on the classic cyclical model. The key global cycle reversal typically occurs about 826 days after the halving. After that, it takes another 70 to 110 days to reach the main peak. In relation to the current cycle, the 826-day zone falls at the end of July. Thus, the potential major bottom is expected in October–November in the range of roughly $50,000–55,000.
However, I do not expect the price to fall in one sharp move. A "bull trap" in July with a bounce to the $70,000 area is quite likely. My current tactical goal is to catch a long in the $58,000–58,500 zone. This would allow profiting from a move to $67,000–70,000, after which a new wave of decline would begin toward autumn.
My conclusion: we are witnessing a classic shift in the investment regime under the pressure of monetary policy. The market is relearning to live in an environment of expensive money, and this process will be painful for all overheated assets, including cryptocurrencies. Investors should prepare for a prolonged correction and reconsider their portfolio structure in favor of defensive instruments.