$BTC

Why is inflation still important in the digital economy?

Even in the decentralized world of cryptocurrencies, traditional economic indicators, such as the Consumer Price Index (CPI), still cast a negative shadow. The Consumer Price Index measures inflation - how much prices of goods and services are rising - and remains a key driver of market sentiment, whether in traditional finance or in cryptocurrencies.

Why is it important? Because high inflation often leads to tightening monetary policy. When the Consumer Price Index is high, central banks (like the Federal Reserve) tend to raise interest rates, which strengthens fiat currencies and pulls capital away from risky assets - including cryptocurrencies. Bitcoin, often referred to as "digital gold," is sometimes seen as a hedge against inflation, but its price reacts significantly to Consumer Price Index data just like stocks: with volatility.