BITCOIN PRICE CORRELATION WITH GOLD POST-QE

Yesterday, following the eagerly anticipated Fed Policy Statement in which it acknowledged the termination of Quantitative easing (QE), the Bitcoin price took a downward path along with Gold. We consider the outlook for the global economy in the weeks ahead as well as the implications for the Bitcoin price.
Start of the Post-Fed QE Era
The Fed being the world’s most powerful central bank – a veritable ‘center’ of all central banks – their decisions and policy lead cascades to all other economies across the globe.
The immediate effect of yesterday’s announcement of the termination of quantitative easing (QE) is that the US equities and bond markets will begin a necessary decline. The inevitability of this outcome is guaranteed by the stated aim of the Fed to spent the money it prints ($85 billion a month at the peak of QE) on two distinct targets: US Treasury bonds and equities (stocks), via agreements with banks to prefer loans destined for equity and mutual fund investment.
Another effect of stopping QE (liberal dollar printing) is that now the Dollar will reflate as can be witnessed across forex charts today. Consider that the Fed does not want a strong Dollar precisely because it will undermine their efforts at increasing the rate of US inflation. So, although the Fed has pledged to increase interest rates, they’re caught in a trap: as soon as they start increasing rates, the Dollar will immediately strengthen as investors move their wealth into USD – perceived as strong and yielding higher interest than other currencies in country economies with lower interest rates.
The core problem is that the Fed applied QE in an effort to artificially kickstart a new Keynesian business cycle. However, the behemoth QE experiment failed miserably. Had it succeeded, we’d see:
increasing employment in the US, rising inflation, greater productivity, greater manufacturing output and increases in quarterly GDP.

This post was published at Crypto Coins News on October 30, 2014.