"As the Federal Reserve prepares to end Quantitative Tightening (QT), the bitcoin price stands at a critical macroeconomic inflection point. With odds for a December rate cut now pricing it in as almost a certainty, the stage is set for a potential shift in monetary policy that could fundamentally alter the trajectory of Bitcoin and broader risk assets. History suggests that when the Fed's balance sheet stops contracting, Bitcoin typically experiences significant bullish catalysts."
"The Fed balance sheet versus Bitcoin chart reveals a compelling pattern. Over Bitcoin's history, there have been only three previous instances where QT ended and the federal balance sheet began flatlining or expanding. The first occurred on October 27, 2010, followed almost immediately by a massive Bitcoin bull rally. The second instance on September 26, 2012, again resulted in an explosive rally into the 2013 double-peak cycle."
"Bitcoin's recent stagnation despite rising Global M2 suggests that monetary liquidity alone isn't driving prices. Instead, the asset appears increasingly correlated with traditional business cycle indicators, particularly the U.S. Purchasing Managers Index (PMI). This metric measures manufacturing confidence and economic activity, and its correlation with S&P 500 yearly returns is striking: when PMI rises, equities typically deliver outsized returns; when PMI falls, markets enter periods of underperformance or recession."
Federal Reserve plans to end Quantitative Tightening and markets price a near-certain December rate cut, creating potential for a shift in monetary policy that could change Bitcoin and broader risk asset trajectories. Historical precedents show three prior balance-sheet reversals (2010, 2012, 2019), each followed by substantial Bitcoin rallies; the 2019 instance was complicated by COVID-19 but still preceded a major multi-year ascent. Recent Bitcoin stagnation despite rising Global M2 indicates monetary liquidity alone is insufficient to explain price moves. Bitcoin shows growing correlation with business cycle indicators, especially the U.S. Purchasing Managers Index (PMI). The copper-to-gold ratio often leads PMI trends and currently appears to be bottoming out.
Read at Bitcoin Magazine
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