Knut Wicksell never got his face on a banknote. He never trended on social media. But 128 years after the Swedish economist published his theory on interest rates and economic instability, Deutsche Bank just built an entire research report around his ideas. And the conclusions matter for anyone holding dollar-denominated assets, including Bitcoin.

The bank’s July 8 report, titled “US deficits: A new twist on Wicksell,” argues that the gap between the US economy’s “natural rate of interest” and the returns available in broader capital markets is so wide that money will keep pouring into America whether policymakers want it to or not. In plain English: the US economy generates such attractive returns, especially in tech, that global capital can’t resist the gravitational pull, making deficit reduction and dollar weakening nearly impossible.

The Wicksell spread, explained without a textbook

In 1898, Wicksell proposed that economic trouble brews when the interest rate set by central banks drifts away from the “natural rate,” which is basically the return investors can earn by putting money to work in the real economy.

Deutsche Bank’s twist is applying this framework to modern US fiscal dynamics. The natural rate, boosted by tech-sector dominance and sustained productivity improvements, sits well above the rates the Fed sets and the yields investors can get from bonds or deposits. That spread acts like a magnet for global capital.

The result is a self-reinforcing cycle. Capital flows in because US returns on equity are elevated. Those inflows strengthen the dollar. A strong dollar makes it harder to close trade deficits. And the fiscal deficit persists because the economy keeps humming along on imported capital, reducing the political urgency to cut spending.

Why crypto investors should care about a 19th-century theory

Deutsche Bank’s report doesn’t mention Bitcoin. It doesn’t reference Ethereum, stablecoins, or any digital asset. Not once.

If Deutsche Bank is right that capital inflows will remain persistent, the dollar stays strong for longer than many macro traders expect. A strong dollar has historically been a headwind for Bitcoin and other risk assets. The widening gap between the natural rate and market rates suggests the Fed may have more room to keep policy rates elevated without choking the economy. Higher-for-longer rates mean higher opportunity costs for holding non-yielding assets like Bitcoin and gold — the same trade-off that hammered crypto in 2022 and 2023.

The same dynamics that keep the dollar strong also keep US deficits ballooning. The US government’s debt trajectory hasn’t changed just because capital keeps showing up to fund it. If anything, easy funding makes the long-term problem worse by removing near-term discipline.

Tech dominance as the engine of capital attraction

Deutsche Bank specifically highlights the technology sector’s role in widening the favorable spread. US tech firms generate returns on equity that dwarf most other sectors and most other countries’ corporate landscapes. This productivity edge, rooted in AI, cloud computing, and semiconductor leadership, is what keeps the natural rate elevated.

Traditional financial institutions’ reluctance to integrate crypto into macro frameworks, as evidenced by Deutsche Bank’s conspicuous omission, signals something about adoption timelines. When a major bank publishes a sweeping fiscal analysis without even acknowledging that a $3 trillion-plus asset class exists, it suggests the intellectual integration of crypto into mainstream economics remains incomplete.