July has officially begun, bringing the hedging narrative back into focus.
At the macro level, volatility is increasing again. On July 8, the US-Iran ceasefire collapsed, sending Bitcoin back to $62,000 and wiping out $300 million in long positions shortly after the news broke. At the same time, oil rose above 4%, regaining the $75/barrel level for the first time since its loss in mid-June.
Although US President Donald Trump later said Iran was open to a new round of negotiations, the damage to risk sentiment had already been done. The odds of oil trading above $80 a barrel this month on Polymarket have risen from just 13% to 65%; This reflects increasing expectations for further geopolitical tensions and tightening of energy markets.
In particular, this change is already evident in macro data.
According to FedWatch, the probability of a rate hike at the upcoming FOMC meeting has risen to 29.4%, the highest pricing in more than a month. This move shows that markets are starting to price in a more hawkish Fed as higher oil prices fuel new inflation concerns.
Naturally, this adds another layer of pressure on Bitcoin (BTC). On-chain data already shows that 50% of BTC supply is underwater, marking the sharpest decline in months. Since market sentiment is already fragile, further macro shocks could quickly accelerate downward volatility and trigger market-wide capitulation.
In this context, the seasonal structure between gold and gold Bitcoin came back into focus. Historically, both assets have performed well in July, putting the BTC/XAU ratio in the spotlight. If macro FUD continues to rise, the rate could offer an early read on whether capital continues to return to Bitcoin or shifts back to gold as the hedge of choice.
Bitcoin/Gold ratio emerges as the most important macro signal of July
Ongoing macro volatility is what makes this cycle different.
Installation is quite simple. Historically both Bitcoin and gold tend to outperform in July. However, this time the background is quite different. Renewed geopolitical tensions have brought interest rate hike expectations back into focus, forcing investors to choose between risk and safety.
As the chart below shows, Bitcoin has recorded strong July returns even during weaker market cycles. In 2018 and 2022, BTC increased by 20% and 17% respectively. Seasonality continues to favor the bulls as BTC enters this July after bouncing off the $57k low. Key takeaway? Gold shows a similar picture.
According to the Kobeissi Letter, gold average July was the second strongest month of the year, with an increase of 1.5% in the last 20 years. With both assets heading into a historically strong month, the BTC/XAU ratio naturally becomes the metric to watch. So far flows are still in favor of Bitcoin.
From a technical perspective, the BTC/XAU ratio is already up more than 4.5% this month, indicating that BTC continues to outperform gold despite macro volatility returning.
The question now is whether this trend can continue. If geopolitical tensions continue to push oil higher and rate hike expectations continue to rise, the balance could quickly shift toward gold, making the BTC/XAU rate one of the clearest indicators of capital rotation this month.
Final Summary
- The BTC/XAU ratio is up over 4.5% this month, showing that Bitcoin is still outperforming gold despite increasing macro uncertainty.
- If macro risks continue to rise, the BTC/XAU ratio could reveal whether capital will remain in Bitcoin or return to gold.
