- Interest rates are an opportunity cost of holding assets. Lower interest rates generally increase asset prices but this is dependent on the information content of interest rate changes.
- Risk-on asset prices generally increase as interest rates decline, except when interest rates are extremely low. Extremely low interest rates indicate economic weakness, inverting the usual relationship.
- Inflation is likely to remain relatively weak but a combination of fiscal policy and tighter labor markets could create genuine sustained inflationary pressure for the first time in a decade.
- As a risk-on asset, Bitcoin is likely to benefit from a continuation of the low-inflation environment with loose monetary policy.
For further details see:
Bitcoin And Inflation: Not The Relationship Everyone Thinks