How does M4 money supply affect the value of digital currencies?

Can you explain how the M4 money supply affects the value of digital currencies? I've heard that changes in the money supply can have a significant impact on the value of traditional currencies, but I'm not sure how it applies to digital currencies like Bitcoin or Ethereum. Could you shed some light on this?

1 answers
- At BYDFi, we believe that the M4 money supply can indirectly affect the value of digital currencies. When the money supply increases, it can lead to inflation, which erodes the purchasing power of traditional currencies. This can drive investors to seek alternative stores of value, such as digital currencies, which can potentially increase their demand and value. However, it's important to note that the value of digital currencies is also influenced by other factors, such as market sentiment, technological advancements, and regulatory developments. Therefore, while the M4 money supply can have some impact on digital currency values, it is just one piece of the puzzle.
Mar 18, 2022 · 3 years ago
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