The Federal Reserve has committed to keeping the fund rate at zero or near zero, maintaining the bull case for bitcoin.
During today’s Federal Open Market Committee (FOMC)
As a result of keeping rates at the zero lower bound, with rising inflation, real interest rates will continue to fall further negative, which is extremely bullish for all asset prices. With Powell’s comments, the secular trend of continued lower real rates is expected. With real yields across the Treasury curve negative, so is the real cost of capital, which further incentivizes the adoption of Bitcoin and the flight from bonds, which now offer very little upside appreciation.
The Fed remains trapped, with the options for the central bank being somewhat binary:
Raise rates: Asset prices get crushed, debt burdens spike in real terms and a deflationary spiral hits the economy, as the implications of an economic system collectively spending more than it has earned for decades is finally felt.
Keep rates at zero: Let inflation “run hot” as real yields continue to go further negative, and the investor class celebrates as all assets skyrocket, bitcoin being the biggest beneficiary, as it is the world’s only asset that is 100% monetary premium, 0% anything else.