Fed Inflation: What is it and How Does It Affect Cryptocurrency?
In economics, inflation refers to a sustained increase in the general level of prices for goods and services. This can be caused by an increase in the supply of money relative to available goods and services, leading to more money chasing fewer items which will drive up prices. When this happens at an excessive rate over time it is referred to as hyperinflation.
The Federal Reserve (also known as “the Fed”) plays a major role in managing inflation through its policy tools such as setting interest rates or changing the amount of currency circulating within our economy. The primary goal behind these policies are usually aimed towards achieving stable economic growth without causing too much volatility from either deflationary or inflationary pressures on our currency value.
Fed-created inflation can have an effect on cryptocurrency markets due its impact on traditional currencies like US dollars that many cryptocurrencies are based off against – if there’s fed-created inflation then their values could decrease compared with other global currencies depending on how central banks respond accordingly via their policies & regulations. Furthermore, since most crypto assets do not offer any form of yield they aren’t seen as attractive investments during periods where there’s high levels of federal created inflations meaning less investors would want to buy them so demand decreases while supply goes up sending price down further still creating even more downward pressure until equilibrium eventually gets reached again once people start buying back into them when conditions become favorable again – this cycle makes it very difficult for traders & investors alike trying predict future trends accurately making timing key factor playing important part here too!
