Monetary Policy: Central banks (e.g., Federal Reserve) manage money supply and interest rates to control inflation. Low, stable inflation preserves value; hyperinflation destroys it.
Demand and Utility: Currencies gain value when used widely in global trade, investments, or as a reserve asset. The more a currency is needed (e.g., for oil or debt issuance), the stronger its demand.
Scarcity Control: While fiat isn’t physically scarce, controlled issuance prevents over-dilution. Excessive money printing erodes value, as seen in cases like Zimbabwe or Venezuela.
Network Effects: A currency’s value grows with its user base. If businesses, banks, and nations prefer it, it becomes self-reinforcing, like a dominant language.