[hn_throw_1234]

I can't see how the no arbitrage hypothesis applies here. You're talking about different currencies. No arbitrage doesn't mean that whatever you do to the world won't change anything.

That said, you're probably right that interest rates would be lower since the demand for debt would go down since Bitcoin is deflationary but then again that goes against what you stated in the first place.

[wyager]

Arbitrage opportunity if bitcoin and USD interest rates are the same, but the EV of holding a bitcoin is higher than holding a dollar: borrow dollars, buy bitcoins, loan bitcoins at current rate, sell bitcoins at repayment, your returns are equal to interest returns plus deflation returns, sell bitcoin, pay back dollar loan. Your profit is equal to the deflationary increase in bitcoin. Bread and butter arbitrage. Financiers would keep doing this until bitcoin loans are lower interest rate enough that this doesn’t make sense.