Makes sense as assets deemed “risky” tens to move with each other. As interest rates are low, its incentivizes investor to borrow against assets to buy more as the threshold needed to cover interest costs are low and are paid by investment income and appreciation. So its like a cycle. As investors seek higher returns, they look towards highly volatile assets like cryptos. So it would make sense that these are correlated. However, it will be interesting to see how this continues as interest rates go up and inflation potentially increases. Sone cryptos may be seen as a safe haven from these as it is not tied to any ine central bank or economy.
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Yep good points. Though if inflation is high, people will need to earn high amounts of interest just to remain somewhat even.
Precisely! Some assets, called hard assets like Real estate and precious metals, normally increase in price to offset the impact of inflation given they limited resources or tangible (can’t be created out of thin air). It is yet to be determined if Cryptos will react the same given their supply cap and they cannot be printed so easily.