How do macroeconomic factors, such as inflation and interest rates, indirectly affect the Dogecoin price?

How do macroeconomic factors, such as inflation and interest rates, indirectly affect the Dogecoin price?

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While not as directly impacted as traditional assets, macroeconomic factors like inflation and interest rates can indirectly influence the dogecoin price by shifting overall investor sentiment and liquidity in the market. During periods of high inflation, some investors might view cryptocurrencies, including Dogecoin, as a hedge against the devaluation of fiat currencies, potentially increasing demand. However, if central banks respond to inflation by raising interest rates, it can make safer, interest-bearing assets more attractive, drawing capital away from speculative assets like cryptocurrencies. Higher interest rates also increase the cost of borrowing, which can reduce the amount of disposable income available for speculative investments. Conversely, a dovish monetary policy with low interest rates can encourage risk-taking and drive investment into higher-yielding, though riskier, assets like Dogecoin. These macroeconomic shifts often influence the broader copyright market, and Dogecoin, despite its unique drivers, tends to follow the general flow of capital.