How does real M2 growth affect the value of digital currencies?

1 answers

• Nov 24, 2021 · 3 years ago
  Real M2 growth, which refers to the increase in the money supply adjusted for inflation, can have a significant impact on the value of digital currencies. As the money supply expands, it can lead to an increase in inflationary pressures, which can erode the value of traditional fiat currencies. This can drive investors to seek alternative assets, such as digital currencies, which are often seen as a store of value and a hedge against inflation. Additionally, the growth of the money supply can also lead to increased liquidity in the market, which can potentially drive up the demand for digital currencies and push their prices higher. However, it's important to note that the relationship between real M2 growth and the value of digital currencies is complex and can be influenced by various other factors, such as market sentiment, regulatory developments, and technological advancements.
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