July has officially kicked off, bringing the hedge narrative back into focus.
At the macro level, volatility is picking up again. On the 8th of July, the U.S.-Iran ceasefire collapsed, sending Bitcoin back toward $62k and wiping out $300 million in long positions shortly after the news broke. At the same time, oil jumped over 4%, reclaiming the $75/barrel level for the first time since losing it in mid-June.
While U.S. President Donald Trump later said Iran is open to another round of negotiations, the damage to risk sentiment has already been done. On Polymarket, the odds of oil trading above $80/barrel this month have surged from just 13% to 65%, reflecting growing expectations of further geopolitical escalation and tighter energy markets.
Notably, the shift is already showing up across macro data.
According to FedWatch, the probability of a rate hike at the upcoming FOMC meeting has climbed to 29.4%, marking the highest pricing in over a month. The move suggests markets are beginning to price in a more hawkish Fed as higher oil prices fuel fresh inflation concerns.
Naturally, that adds another layer of pressure on Bitcoin [BTC]. On-chain data already shows that 50% of the BTC supply is now underwater, marking the sharpest decline in months. With market sentiment already fragile, any further macro shock could quickly accelerate downside volatility, triggering market-wide capitulation.
Against this backdrop, the seasonal setup between gold and BTC is back in focus. Historically, both assets have performed well in July, putting the BTC/XAU ratio at the center of attention. If macro FUD continues to build, the ratio could offer an early read on whether capital continues rotating into Bitcoin or shifts back toward gold as the preferred hedge.
Bitcoin/Gold ratio emerges as July’s most important macro signal
The ongoing macro volatility is what sets this cycle apart.
The setup is fairly simple. Historically, both Bitcoin and gold tend to outperform in July. This time, though, the backdrop is quite different. Renewed geopolitical tensions have brought rate-hike expectations back into focus, forcing investors to choose between risk and safety rather than chasing both.
As the chart below shows, Bitcoin has posted strong July returns even during weaker market cycles. In 2018 and 2022, BTC rallied 20% and 17%, respectively. With BTC entering this July after bouncing from its $57k cycle low, seasonality continues to favor the bulls. The key takeaway? Gold is showing a similar pattern.
According to the Kobeissi Letter, gold has averaged a 1.5% gain in July over the past 20 years, making it its second-strongest month of the year. With both assets entering a historically strong month, the BTC/XAU ratio naturally becomes the metric to watch. So far, the flows still favor Bitcoin.
From the technical standpoint, the BTC/XAU ratio is already up more than 4.5% this month, showing BTC continues to outperform gold despite the return of macro volatility.
The question now is whether that trend can continue. If geopolitical tensions keep driving oil higher and rate-hike expectations continue to build, the balance could quickly shift back toward gold, making the BTC/XAU ratio one of the clearest gauges of capital rotation this month.
Final Summary
- The BTC/XAU ratio is up over 4.5% this month, showing Bitcoin is still outperforming gold despite rising macro uncertainty.
- If macro risks continue to build, the BTC/XAU ratio could reveal whether capital stays in Bitcoin or rotates back into gold.
