JohnCameron93

Analysis of the FED Timeline vs BTC/USD during the Mt. Gox Era

MTGOX:BTCUSD   Bitcoin / U.S. Dollar
I wanted to project the timing of each Federal Reserve action on to BTC/USD during the Mt. Gox period to see if any correlation at all can be drawn from the FED's actions. I will also do this for the period after Mt. Gox.

  • Quantitative easing is said to devalue a currency and also cause inflation in asset prices.
  • Operation Twist was the buying of long maturity bonds and in turn selling short maturity bonds to avoid inflation ; by selling bonds this created a risk-off environment and strengthened the USD.

QE2 announced by the FED on November 3rd, 2011.
It is quite interesting to note that during this time BTC also mounted its first extreme rally as the FED weakened the USD.

QE2 concludes in June, 2011.
As QE2 ends in June BTC experiences its first bubble and pops. As the FED stopped devaluing USD, BTC begun retracing.

FED announces Operation Twist on September 21st, 2011
The Federal Reserve begins purchasing bonds with 6 - 30 year maturities and selling bonds with maturities less than 3 years. This strengthens the USD as investors move to risk-off. BTC continues correcting.

FED announces Operation Twist will be expanded on June 20th, 2012
At this stage BTC had not created a new high in over a year since QE2 had ended as the USD continues strengthening.

QE3 announced by the FED on September 13th, 2012
FED expands QE3 on December 12th, 2012
After one year and 8 months BTC breaks its all time high and rallies substantially as the USD was further weakened by the FED. The FED could also no longer sell short maturity bonds as they did not have sufficient holdings to do so; creating a risk-on environment.

February 2014 Mt. Gox files for Bankruptcy
It is hard to project a continuous correlation between the FED and the USD as the collapse of Mt. Gox was devastating to the price of Bitcoin .
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