In recent months, social media influencers on Twitter announced that quantitative easing (QE) is the rocket fuel for Bitcoin .
The reason is simple. If governments can print billions of dollars, some of them will eventually reach BTC. In addition, QE can help people realize that governments can do whatever they want with the money supply, while the original cryptocurrency has a fixed offer, as he learned. cryptocurrency Cryptocurrency .
People were led to believe that this is how the system works. Influencers accumulated likes, retweets and continue to spread a marketable idea. They did it with very little evidence to support their claims.
Recently, evidence emerged about the correlation of QE and the price of Bitcoin . In fact, a widely followed economist hastened to point out that such a connection does not exist.
Investors seek safe haven assets
Quantitative easing is a monetary policy that allows a central bank to buy government securities, such as Treasury notes and other securities, from the market. The idea is to inject liquidity into the financial system to encourage commercial and consumer loans . The objectives are to promote spending and stimulate the economy.
QE sounds good in theory, but it has several drawbacks. A disadvantage is that QE reduces the value of the dollar by increasing the supply of the dollar in circulation. Therefore, social media influencers argue that smart investors will look for assets that can help protect their wealth.
A leading candidate who benefits from the printing of Federal Reserve (FED) money is Bitcoin . Although cryptocurrency is a volatile asset, volatility has been on the rise.
More importantly, Bitcoin’s unique value proposition implies being an uncorrelated asset . The dominant price of the cryptocurrency does not depend on the policies of the central bank and the financial system. Therefore bitcoin seems to be the perfect coverage against fiscal irresponsibility, like another round of QE.
QE sounds good, but it doesn’t hold
Alex Krüger, economist and trader, explained on Twitter that BTC has dropped 30% since the Fed expanded its balance sheet in August. The recent liquidation emphatically dissipates the myth that QE is rocket fuel for the cryptocurrency.
The trader then explained that Bitcoin does not respond to macro factors such as QE . On the contrary, Kurger said that only a handful of people are needed to influence the price of the digital currency. Therefore, the upper cryptocurrency responds to micro factors and not macro.
With QE out of the picture, Bitcoin HODLers can only rely on halving and narratives of the stock & flow relationship to catalyze the bullish price action.