Inflation Assets Are Smiling: Adoption will drive valuation in digital assets. Following the path of the internet, users of digital assets will rise to 1.2 billion in 2030 from around 110 million today. Network effects are everything. No network, no value. Adoption can be new with innovation creating demand, it can take market share from other tools, or both. Either way, there needs to be network demand. After the pandemic, the case for macro demand centered on inflation. Not only were digital assets useful, but their supply, or monetary policy, was conservative at a time when global macro policies lost their anchor. But digital assets didn’t take their cue from inflation. Quite the opposite. The correlation between US inflation and bitcoin was -44% in the past two years. This was not unique to digital. Inflation assets – like gold, steel, land, and lumber – collapsed more broadly. Investors rushed into cash not to hedge inflation, but because everything around them was rapidly deflating. Markets were foreshadowing a fracture in demand, a deep recession. And then the Fed showed up with its new magic words – a “broad and forward-looking view” would decide future rate hikes. It signaled rapid tightening was over. Volcker-era policies were off the table. The fixation of markets has been on a soft landing ever since. Bad news is good again. Real interest rates can decline. The US dollar can weaken. Markets can cushion bad news today in hope for a brighter tomorrow. Inflation assets are happy again. It’s a policy call as to whether it stays that way.