Fed’s Move Sparks Worry: Will Bitcoin Drop Like It Did in 2019?
Following the Federal Reserve’s announcement of a 25 basis point rate cut, Bitcoin fell 3.67% to $107,925. The Fed essentially signaled the end of quantitative tightening (QT) when it announced intentions to cease its balance-sheet runoff beginning in December. The Fed will no longer permit its bond holdings to decrease as of December 1. It will start reinvesting maturing debt in Treasury bills with a short maturity (T-bills).
Fed Policy Shift Revives Fears of a Bitcoin Correction
The Fed will use the money it receives from the repayment of its old bonds to purchase new short-term government debt rather than destroying them and reducing its balance sheet. According to data cited by expert Brett, Bitcoin dropped 35% when the Fed concluded QT 2019 and started reducing interest rates. That is in spite of the fact that US stock markets, which usually move in lockstep with Bitcoin, were growing at the time. It was not until the Fed began full-scale quantitative easing (QE) in early 2020, in response to COVID-19 concerns, that the Bitcoin market began to recover.
I would say we’re at peak of the 4 year cycle now though…which may not be any better. If we get QE, I don’t see it happening until late next year.
Brett
BTC Charts Hint at Trouble as MACD Turns Negative
In the meantime, there are indications that a bear market may be about to begin. The three-week chart of Bitcoin showed a negative MACD crossover, according to analyst Jesse Olson. In 2021–2022, this technical indication came before a 69% market slump. Therefore, before a fresh rally fueled by liquidity arises, Bitcoin faces downside risks if history repeats itself.
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