Debt Costs More When Rates Go Up
Also Two Sigma feuding, MiFID II modifications, crypto exchange internal market makers and “only insider trade while drunk.”
This is maybe the first real interest-rate-hiking cycle of my professional life, and I’m kind of excited? Not just my professional life. I’m pretty old!1 A whole lot of people in fairly senior roles at a whole lot of financial services companies grew up a world of low interest rates; large expanses of the financial industry collectively forgot that rates could go up. Now rates have gone up. Those two facts — rates have gone up, and lots of people have never seen rates go up — are going to lead to interesting results. Weird stuff will happen because the most predictable fact in the world — “interest rates can’t stay low forever” — was, somehow, unforeseen.
Look around! Is the story of crypto “when rates were zero for ages, a dollar in 100 years was worth as much as a dollar now, so people got really into trading digital assets that had no foreseeable cash flows, and then rates went up and everyone woke up and realized that was dumb and stopped”? Is that also the story of blitzscaling tech-startup unicorns? No, but also a little bit yes?