A lot of spending in fintech was fueled by low interest rates. So there is kind of a trifecta forming to lower crypto equity prices caused by higher interest rates:
1. The risk-free return is higher, which lowers the value of risky assets broadly.
2. The increased cost of borrowing money makes it more expensive to run a cash-flow negative business.
3. Part of the spending in crypto was driven by speculation, which was a side-effect of free money.
1. The risk-free return is higher, which lowers the value of risky assets broadly.
2. The increased cost of borrowing money makes it more expensive to run a cash-flow negative business.
3. Part of the spending in crypto was driven by speculation, which was a side-effect of free money.