How does the US Fed balance sheet affect the value of digital currencies?

1 answers

• Abir AntorJul 16, 2024 · a year ago
  As an expert at BYDFi, I can tell you that the US Fed's balance sheet plays a crucial role in shaping the value of digital currencies. When the Fed expands its balance sheet, it effectively creates more money, which can lead to inflationary pressures. This inflation erodes the purchasing power of traditional fiat currencies and can drive investors towards digital currencies as a store of value. On the other hand, when the Fed contracts its balance sheet, it reduces the money supply, which can have a deflationary effect and potentially increase the value of digital currencies. Therefore, understanding the actions of the US Federal Reserve and their impact on the balance sheet is essential for predicting the value of digital currencies.
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