How do changes in fiscal and monetary policies influence the volatility of cryptocurrencies?

3 answers

• TiaOct 23, 2020 · 5 years ago
  Changes in fiscal and monetary policies can have a significant impact on the volatility of cryptocurrencies. When governments implement expansionary fiscal policies, such as increasing government spending or reducing taxes, it can lead to an increase in the demand for cryptocurrencies. This increased demand can drive up the prices of cryptocurrencies and result in higher volatility. On the other hand, contractionary fiscal policies, such as reducing government spending or increasing taxes, can decrease the demand for cryptocurrencies and lead to lower volatility. Similarly, changes in monetary policies, such as interest rate adjustments or changes in money supply, can also influence the volatility of cryptocurrencies. For example, when central banks increase interest rates, it can make traditional investments more attractive compared to cryptocurrencies, leading to a decrease in demand and potentially lower volatility. Overall, the relationship between fiscal and monetary policies and the volatility of cryptocurrencies is complex and can be influenced by various factors such as market sentiment, investor behavior, and regulatory developments.
  1160

  580
• Ali AkbarAug 04, 2025 · 13 days ago
  Well, let me break it down for you. Fiscal and monetary policies play a crucial role in shaping the volatility of cryptocurrencies. When governments decide to loosen their fiscal policies by increasing spending or reducing taxes, it can stimulate economic growth and increase the demand for cryptocurrencies. This surge in demand can lead to higher prices and greater volatility. Conversely, if governments tighten their fiscal policies by cutting spending or raising taxes, it can dampen economic activity and reduce the demand for cryptocurrencies, resulting in lower volatility. Monetary policies, on the other hand, are controlled by central banks. When central banks raise interest rates or reduce the money supply, it can make traditional investments more attractive and reduce the demand for cryptocurrencies, leading to decreased volatility. However, it's important to note that the relationship between fiscal and monetary policies and cryptocurrency volatility is not always straightforward and can be influenced by various external factors and market dynamics.
  1071

  357
• Ruhiyye26Sep 05, 2021 · 4 years ago
  As an expert in the field, I can tell you that changes in fiscal and monetary policies have a significant impact on the volatility of cryptocurrencies. At BYDFi, we closely monitor these policy changes and their effects on the crypto market. When governments implement expansionary fiscal policies, it can create a positive environment for cryptocurrencies, leading to increased demand and potentially higher volatility. On the other hand, contractionary fiscal policies can have the opposite effect, reducing demand and potentially decreasing volatility. Monetary policies, such as interest rate adjustments, also play a role in shaping cryptocurrency volatility. For example, when central banks raise interest rates, it can make traditional investments more attractive and reduce the demand for cryptocurrencies, resulting in lower volatility. However, it's important to remember that the cryptocurrency market is highly complex and influenced by various factors, so the relationship between fiscal and monetary policies and volatility is not always straightforward.
  1068

  267