Higher Rate Expectations Hit Hedging Assets, Dragging Down Bitcoin and Gold

The recent relief rally that lifted crypto off last week’s lows is now fading, alongside weakness in tech stocks and gold, as traders position ahead of U.S. inflation data and expectations that the Federal Reserve under Kevin Warsh may remain hawkish.

Bitcoin’s rebound from last week’s low is rolling over, with BTC and gold both moving lower in tandem.

Bitcoin last traded at $61,233, down 3% over 24 hours and 6.9% for the week. Gold also fell about 2%, slipping below $4,200 an ounce. Markets are increasingly pricing in higher interest rates, which tends to weigh on non-yielding assets like Bitcoin and other cryptocurrencies.

Ethereum declined 3.4% to $1,625, while Solana dropped 4.1% to $64.24. XRP fell 4.3% to $1.12, and both BNB and Dogecoin slipped less than 3%. Hyperliquid’s HYPE token led losses among majors, down 10.2% on the day and 21.3% on the week, reflecting its higher-risk profile.

Equity markets also weakened. South Korea’s KOSPI, heavily tied to the AI and semiconductor trade, dropped 6.3%, contributing to a 2.5% decline in MSCI’s Asia-Pacific index for its fourth loss in five sessions. Nasdaq 100 futures also pointed lower, down 0.8% after a volatile session. Brent crude traded near $92 per barrel amid renewed U.S. strikes on Iran, while the 10-year Treasury yield rose to 4.54%.

Gold and Bitcoin rarely move together, but both are now under pressure as rising rate expectations reduce demand for non-yielding assets. Wednesday’s U.S. inflation report could reinforce that dynamic.

A hotter-than-expected CPI reading would strengthen expectations that Federal Reserve Chair nominee Kevin Warsh may keep rates higher for longer, tightening liquidity conditions that have historically supported risk assets.

The recent bounce was largely driven by a short squeeze rather than fresh spot demand, with over $500 million in bearish positions liquidated—the largest such move since April.

However, market participants say underlying demand remains weak.

“Buyers have stepped in after the move lower, but spot demand has yet to return in a meaningful way,” said Diana Pires, chief business officer at sFOX, noting continued outflows from U.S. spot Bitcoin ETFs that are keeping institutional flows subdued. Without stronger inflows, she added, rallies are struggling to sustain momentum.

The focus now turns to whether Bitcoin can hold support through the inflation print or continue tracking equities lower. If gold stabilizes while Bitcoin continues to fall, its appeal as a macro hedge could weaken further.