Federal Reserve ( FED ) is the central bank of the United States, created in 1913 by Congress to provide a safer, more flexible, and more predictable monetary and financial system.
The FED system was designed based on four key principles such as establishing a central bank, setting responsible fiscal policy, maintaining the stability of the financial system and moderating long-term interest rates.
Today there are twelve Reserve Banks located in cities across the nation and led by presidents appointed by their district’s member banks.
- How important is the FED ?
FED is a federal agency tasked with implementing the monetary policies of the United States. The Fed’s primary job is to protect the economy against inflation and to meet full employment. To do this, they decide how much money is needed in circulation, how fast it should change hands and what impact that will have on the economy as a whole.
In order to effectively monitor these tasks and make appropriate decisions, they must also take into account economic factors like GDP growth, unemployment rate and inflation rate.
FED is an organization which is responsible for the stability of our economy. FED has a great impact on our lives because it is the main source of money supply in America, and can control the interest rate which influences all other factors in the world economy.
- How the FED affects cryptocurrencies ?
FED can cause an impact on cryptocurrencies by controlling the volume of money available for blockchain to grow. The Federal Reserve controls quantitative easing, which is the creation of more money by the government, thus increasing the supply and decreasing the value of each bitcoin. On top of that, it controls inflation as well through interest rates. The interest rates are what keep people from investing their money into bitcoins because it makes them less valuable over time and therefore more difficult to afford.
FED affects cryptocurrencies by manipulating the supply of money and dropping interest rates to increase credit and liquidity. This is done to help economic growth, but in the process inhibits cryptocurrency prices.
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