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US Monetary Policy and the Ripple Effects on Bitcoin and Crypto: Is QE Back in the Game?

Jordi Alexander, CIO of Selini Capital, analyzes the potential impact of US monetary policy on the Bitcoin and crypto market. He highlights concerns in the bond market, implying a policy shift by the Federal Reserve. Alexander suggests a possible return to quantitative easing (QE) and predicts that Bitcoin and cryptocurrencies could benefit from this. However, there are differing opinions on the matter. Bitcoin is currently trading at $26,677.

Our analysis of the situation

The world of finance has its fair share of intricacies, but when it comes to US monetary policy and its impact on the Bitcoin and cryptocurrency market, things can get downright fascinating. Jordi Alexander, the mastermind behind Selini Capital, offers a compelling analysis of the potential ripple effects these policies may have on digital assets. It's time to take a closer look at the complex market dynamics that every investor should keep an eye on.

The Federal Reserve's approach to handling current economic conditions seems to be reaching a critical point, according to Alexander. A decline of 46% in the value of bonds with maturities exceeding 10 years since their peak in March 2020 has raised concerns in the bond market. The situation is even worse for 30-year bonds, which have experienced a staggering drop of 53%.

Unphased by the gravity of the situation, Alexander boldly states, "Gradually at first.. then all at once, the Fed will poo-poo in their pampers." We can't help but appreciate his colorful metaphor.

The recent shifts in the bond market, particularly the decline in long-term bonds, serve as a precursor to potential policy changes. Alexander references Dallas Fed President Lorie Logan, who has expressed reservations about the previous hawkish stance of the Federal Open Market Committee (FOMC). This change in sentiment highlights the battle between the need for restrictive financial conditions to curb inflation and the overall strength of the labor market and economic output.

According to Alexander, Logan's U-turn signifies that the Fed is beginning to realize that it's losing control of the bond market. He provocatively explains, "This is the Bat-Signal I have been waiting for. What does it mean? Why is the Dallas Fed president in the top tweet doing a big baby U-turn? Because they are starting to realize they are losing control of the bond market!"

A deeper examination of the bond market reveals that the Federal Reserve has better control over the front end of the curve, including T-bills and 2-year bonds. However, it struggles to influence the back end, especially when it comes to 30-year bonds. Alexander believes that this diminishing demand for long-term bonds indicates a potential loss of market control by the Fed.

This delicate situation leaves the Federal Reserve in a bind. Alexander asks, "What if they agree to stop raising rates or even initiate cuts, but bond buyers still don't show up?" He suggests a likely shift in the Fed's approach towards Yield Curve Control, possibly leading to a revival of Quantitative Easing (QE) policies.

Drawing a parallel to Japan's financial landscape, Alexander predicts that the USD could suffer a similar fate to the struggling Yen. As a result, he foresees a potential revival of QE, stating, "Goodbye Quantitative Tightening, hello my old friend Mr. QE. The timeline is uncertain, but it is time to start paying attention to term premium, like the Dallas Fed!"

But what does all this mean for Bitcoin and cryptocurrencies? Well, according to Alexander, they could be in for major gains if QE returns to the scene. He reminds us that digital assets significantly benefited from QE during the previous bull market. And he's not alone in his prediction. BitMEX founder Arthur Hayes also forecasts a Bitcoin price of $750,000 in 2026, assuming the Fed reintroduces QE.

Of course, not everyone shares this viewpoint. Yuga.eth from Coinbase believes in the FOMC's commitment to tackling inflation. Alexander sarcastically responds, "Nothing about increasing the debt is helping the inflation anyway." He suggests increasing taxes, particularly corporate, as a more effective approach.

At the time of writing, Bitcoin is trading at $26,677, leaving us all wondering about the potential impact of US monetary policy on this digital asset.

In conclusion, the intricate interplay between US monetary policy, the bond market, and Bitcoin and cryptocurrencies is captivating. As the Fed contemplates its next move, investors should stay informed and prepared for potential shifts that may heavily impact their portfolios. So, keep an eye on the term premium, just like the Dallas Fed, and brace yourself for the return of Mr. QE. Who knew monetary policy could be this intriguing?

Disclaimer: The views expressed in this article are solely the opinions of the author and should not be construed as financial advice. Always do your own research before making any investment decisions.

Disclaimer: Our articles are NOT financial advice, and we are not financial advisors. Your investments are your own responsibility. Please do your own research and seek advice from a licensed financial advisor beforehand if needed.
Image(s) are provided by LoremFlickr and/or other free sources. They are illustrative and may not represent the content exactly.

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