2018 Data: Bitcoin Recovery Unlikely until the Fed stops reducing its balance sheet


Bitcoin Recovery is unlikely until the Federal Reserve stops reducing the size of its balance sheet. We have evidence from 2018 to support this argument.

Bitcoin Recovery Cues: Federal Reserve Balance Sheet in 2018

Beginning Feb 2018, the Federal Reserve reduced its balance sheet from $4.4 Trillion to $3.8 Trillion

What happened to Bitcoin during this period?

Bitcoin began February 2018 at $9171 and then dropped to $3.2k by December 2018 (See Pic below). It then recovered from $4.1k in March 2019 to about $13k by June 2019 before ending August 2019 at $9.6k, just $500 higher than when the balance sheet reduction began.

An initial recovery began in March 2019 after the Fed announced that it would begin to stop reducing its balance sheet from September onwards.

Source: CNBC

However, the recovery took Bitcoin to exactly the same level as it was when the Fed began to reduce the size of its balance sheet.

Bitcoin Recovery Cues: Federal Reserve Balance Sheet in 2022

Let us look at how 2022 is playing out so far.

Firstly, Bitcoin responded fairly quickly to Inflation rising above 6% in November 2020 in anticipation of the Fed reducing its balance sheet again. The actual reduction began in April 2022.

What happened to Bitcoin?

  • Between January 2022 and April 12th, 2022, Bitcoin prices ranged between $48k and $33k. Bitcoin began January 2022 at $47k and ended March 2022 at $47k.
  • Between April 2022 and September 2022, Bitcoin ranged between $47k and $18k. Bitcoin began April 2022 at $47k and is currently trading at $20k.

Unlike January and April where there was a high degree of volatility, Bitcoin has only trended lower or remained steady between April and September. (See pic below). There has been NO SERIOUS attempt to recover.

To Conclude: Bitcoin is unlikely to recover until the Fed signals it is pausing the balance sheet reduction. The Fed is likely to do so probably after Inflation falls below 6%. This is in turn related to numerous factors both local and Global.

Latest Comprehensive Bitcoin Price Prediction

Note: Crowdwisdom360 collates Predictions and data from all over the net and has no in-house view on the likely trends in the Stocks or Crypto Coins. Please consult a registered investment advisor to guide you on your financial decisions.

2018 Data: Bitcoin Recovery Unlikely until the Fed stops reducing its balance sheet



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