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Bitcoin’s October rally appears to have put the cryptocurrency on a firm footing ahead of central bank meetings in the U.S., U.K., and Australia to assess the stickiness of inflation and determine policy response.

The top cryptocurrency rallied nearly 40% in October, hitting a fresh record high of $66,975 as investors cheered positive seasonality and the launch of futures-based bitcoin exchange-traded funds (ETFs) in the U.S. That was the biggest single-month percentage rally since December 2020, according to CoinDesk data.

While key indicators favor a positive follow-through in the coming months, it may not be a smooth ride if the impending scaling back of stimulus, also known as the taper, by the U.S. Federal Reserve (Fed) and other major central banks rocks equity markets.

“Bitcoin bullish sentiment remains at fever-pitch, highlighted by NFT. NYC [the annual non-fungible token event] whipping the financial capital into a frenzy,” Jehan Chu, managing partner at Hong Kong-based Kenetic Capital, told CoinDesk in a WhatsApp chat. “[However], if public markets falter on the back of Fed bond purchase tapering, BTC could be dragged into a small correction after breaching all-time highs last week.”

Wednesday’s Fed meeting is widely expected to conclude with policymakers announcing plans to begin tapering the monthly $120 billion in asset purchases that have triggered unprecedented risk-taking across all corners of financial markets over the past 18 months.

Analysts told CoinDesk last month that the Fed taper is priced in. So, the market reaction will depend on the Fed’s language on inflation and the timing of the first interest rate hike.

Several policymakers have recently said that inflation is proving to be more sticky than previously expected. Meanwhile, bond traders and interest rates futures have ramped up bets on early rate hikes.

On Friday, analysts at Goldman Sachs brought forward their forecast for the first rate hike to July from Q3 2023, according to Bloomberg. The investment banking giant expects the second rate hike in November 2022, followed by two hikes in 2023 and 2024.

Fed funds futures are now pricing hikes beginning early in the second half of 2022. The U.S. two-year Treasury yield, which is more sensitive to short-term interest rate/inflation expectations than the 10-year yield, nearly doubled to 50 basis points in October.

While equities and bitcoin have remained resilient, things may change if the Fed statement carries fewer references to inflation being “transitory”. That would perhaps imply policymakers’ growing discomfort with high inflation and validate fears of faster rate hikes, in turn, bringing selling pressure to equities and bitcoin.

ByteTree Asset Management’s Charlie Morris told Bloomberg that bitcoin is a “risk-on inflation hedge”. The cryptocurrency’s gold-like store of value appeal mainly attracts buyers when global financial markets see strong demand for growth-sensitive assets. However, bitcoin mostly takes a beating when global markets wilt.

Aside from the Fed meeting, investors will keep an eye on Tuesday’s Reserve Bank of Australia’s (RBA) meeting and Thursday’s Bank of England’s rate decision and Friday’s U.S. nonfarm payrolls report. Money markets expect the BOE to hike interest rates this week.