Relatively high interest rates in historic aspect are currently supported at present by the Federal Reserve and the European Central Bank.
High interest rates weigh on non interest-bearing assets like shares in young, startup technology companies or even the equities of established publicly listed companies like Alphabet Inc, formerly Google inc, Meta Inc, formerly Facebook Inc and Amazon Inc which have never distributed dividends. Dividends can be considered an interest rate derived from holding a publicly listed stock.
Young, nascent, startup technologies and young, moonshot technologies like Artificial Intelligence, Bitcoin, blockchain, 3D printing are also supposed, at least according to economic and financial theory, to face difficulties in their development with higher interest rate levels present.
That, with Bitcoin, cryptocurrencies and Artificial Intelligence, AI has not been the case.
Bitcoin, cryptocurrencies prices and the prices of cryptocurrencies and Artificial Intelligence, AI related stocks have risen since the beginning of 2023, even though the Federal Reserve, the European Central Bank and the Bank of England, three global leading central banks have raised their target interest rates and thus support a higher interest rate environment.
One explanation for Bitcoin, crypto and AI's resilience could be the fact that over 10 trillion USD of new fiat money has been created or printed by he Federal Reserve, the European Central Bank, the Bank of Japan, the Bank of England and other central banks all over the world to support economic growth in the last 10 years.
This 10 trillion USD enormous quantity of paper money gets electronically enlarged by corporate and personal banking credit lines and corporate and personal deposits via the money multiplicator and thus the newly created money now most probably runs into tens of trillions of USD. The Federal Reserve and the European Central Bank are trying to withdraw all this newly created liquidity by tapering their balance sheets, but due to the enormous amount of additional money outstanding, the process is slow.
Wolfteam Ltd.'s corporate view is that exactly this newly created liquidity is what keeps driving up an holding at high level the prices of Bitcoin, cryptocurrencies and AI stocks.
Until all this extra created money is soaked in one way or another risky, non interest-bearing assets like small capitalization technology stocks, start up equity investments, large AI, cryptocurrency related companies and large technology companies' stocks that do not distribute dividends will continue either to rise or hold their value at a very high, unreasonable by most Price/Earnings, Price/Books, Price/Sales, Debt/Equity etc. valuation multiples.
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