Definition ∞ Inflation risks describe the potential for an increase in the general price level of goods and services over time, diminishing purchasing power. This economic phenomenon can reduce the real value of monetary assets and fixed income investments. Central banks typically manage these risks through monetary policy adjustments. Understanding these risks is crucial for assessing investment stability and economic outlook.
Context ∞ In the digital asset sphere, inflation risks are frequently discussed concerning fiat-backed stablecoins and the broader appeal of cryptocurrencies as a hedge against traditional currency devaluation. Many view Bitcoin, for example, as a deflationary asset due to its capped supply, potentially offering protection during periods of high fiat inflation. News often covers how macroeconomic inflation trends impact investor sentiment and capital flows into the volatile digital asset markets.
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