Question #80 ·
Why do Fed monetary easing and inflation concerns matter for Bitcoin’s potential role as a hedge?
- Easing rates make Bitcoin less valuable, increasing its volatility and reducing its effectiveness as hedge.
- Inflation concerns lower demand for all assets, including Bitcoin, as investors move into cash savings.
- Easing rates lower returns on cash and bonds, pushing investors toward Bitcoin for inflation protection. Right answer
Why is this the correct answer?
This is correct because when the Federal Reserve cuts rates or signals easier policy, traditional safe assets like savings accounts and government bonds offer lower yields. Investors then search for alternatives that can preserve value against rising prices. Bitcoin’s limited supply and decentralized nature attract those seeking a hedge against inflation, making it more appealing during monetary easing.