BTC and Quantitative Easing: What's the Correlation to Crypto?

Can quantitative easing act as momentum for Bitcoin?

This notion of excessive risk-taking during quantitative easing was highlighted in a report by the International Monetary Fund, which said that "Prolonged monetary ease may also encourage excessive financial risk-taking, in the form of increased portfolio allocations to riskier assets." Thanks to its widespread stigma as a "Risk-on" asset, Bitcoin could, in theory, reap some of the benefits afforded by increased demand for more perilous investments.

"QE is designed to keep zombie banks alive. Bitcoin was introduced to battle zombie banks and QE and the price has exploded higher in response to the increase in global reliance on the accounting fraud and chicanery of QE. There is no end to QE. There is no scenario other than all fiat everywhere crashes to zero. And there is no top to the Bitcoin price. $1 million and above is virtually a certainty at this point."

"Bitcoin is not a debt-based system that periodically experiences bank run-like instability. In this regard, Bitcoin is an insurance policy against financial market instability. Bitcoin is no one's IOU. It has no lender of last resort because it doesn't need one."

This is an important distinction to make when weighing up any correlation between QE and Bitcoin's price action.

"There is no evidence BTC has benefited from prior QE rounds. However, the more engrained with traditional markets Bitcoin becomes, the higher the impact one should expect. The QE impact should be significant if by then BTC is already behaving from a macro standpoint as digital gold, which is not yet the case."

As Krüger notes, this correlation could strengthen as Bitcoin matures.

The Fed's balance sheet tends to increase in conjunction with various QE rounds, as it did from 2008 to 2014, but it also seems to share very little correlation to any increases in Bitcoin's price.

In June, the first rate cut in Bitcoin's nascent history was imposed by the Fed, with Powell alluding to the escalating U.S.-China trade war.

As for a consensus on Bitcoin's potential reaction to quantitative easing, it's perhaps too early to tell.