$175 billion just printed and the Bitcoin price goes down!

[audaciousbeing]

This is really amazing, the Federal Reserve just printed some more toilet paper money and injected it into the financial market and the Bitcoin price takes a 5% nose dive. 

How gullible are the investors that they would be willing to pull money out of their Bitcoin investments to fund investments in the over inflated stock markets. 

I think this is just another Bear trap in the making, because we all know what is going to happen on the 23rd of September, when Bakkt is going live!

Let's stay calm and ride this out, because I am definitely not going to sell my coins to greedy scumbags, who are just into Bitcoin for the quick profits. 

Do you think this is a Bear trap? Let's discuss...... 

You cannot conclude that they are gullible because to the extent of their own understanding they are doing the right thing. Also, government printing more money does not necessarily means creating money out of the tin air because a large portion of it would go to replacement of shredded notes that have been retrieved from the economy and also, huge money would have equally be expended in the printing of the money which means the effect in the area of creation of wealth is just going to be marginal if it will have any effect at all.

On the relationship to the price of bitcoin, I personally think its really because bitcoin and the crypto market has not grown to maturity that is why its responding to the printing of currencies of just a country and this wont be there till forever.

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[1Referee]

Bitcoin and Gold both haven't done much lately. I think the main point is that we have to understand how investors think, and their gameplan is to front run everything they consider important enough to potentially influence the price. I'm strongly of believe that investors are quite disappointed because they expected much worse measures to be taken, also when it comes to the ECB.

Another reason why Bitcoin isn't doing much is because it's stuck in what appears to be a bearish formation, which we will see it break out of in 10ish days. It could very well be that investors are waiting for that breakout to become active again. Perhaps that moves comes sooner with Bakkt going live next monday. We'll have to wait and see.

[el kaka22]

The great deal about is that printing new money means that dollar will be less valuable in the end and that will create an inflation and people will certainly stay with bitcoin because there is no more new printed so when you calculate how much bitcoin is going for how many dollars in the world the % changes and it becomes lower and lower which means bitcoin will eventually worth more.

I know it sounds like something that should made bitcoin go up instead of 5% down but that is just the short term near sighted result for now, if you wait long enough I am sure eventually bitcoin will go up in price because of inflation. We just have to wait and see how bitcoin will react to it over time, now that halving is coming close the "printing" of our money will be cut down in half as well.

[fillippone]

My only point is that I wanted to point out it is not true the FED printed 125 Billions of USD. They didn’t .
Then we can discuss about the opportunity to conduct operation to provide the market with a liquidity they were seeking with an overnight rate of 10% (this rate should have been in the 2.10%-2.15% zone instead). In addition to that 125 BLN is a drop in the ocean on the money market size. A market that is way bigger than Bitcoin (175 Billions) or the 125 billions equity derivative book of a single troubled German bank is trying to sell as we speak.

Of course I understand l am writing on bitcointalk.org so not only not everyone has a specific knowledge of how this things develop and why happen, and have a (rightful) tendency to interpret everything on with and anarcho-liberist view.
What I can say is that bitcoin is a complex subject, at the crossroads of many different fields in the human knowledge (cryptography- distributed networks-game theory-monetary theory to name the most important).
Well, for my personal history I think I can give most of my positive contribution on the latter field. So while I might miserably fail giving programming tips or indicating what syntax a .blk file has (true story), I feel pretty confident in saying that this is not an issue, and this particular fact, that way even reported on a very incorrect and superficial way, by no mean can have direct or indirect influence on bitcoin valuation.
There are way more disturbing act by the CB’s influencing bitcoin valuation hundreds times more than this. Don’t get lost analysing a detail losing the big picture.

We might discuss how negative rates, QE and KYC/AML and institutional money influence the bitcoin valuations, these are facts way more important. Please point me in the right direction if you know some thread where you are discussing these.

[RealMalatesta]

Unfortunately, that type of money will be never seen by the regular folks and that's the problem.

When a new money printed it usually covers the "debts" of a nation or series of companies and that causes the real trouble, money out of thin air is not something central banks do to actually cover the costs of lets say medical bills of its citizens, that would help a lot of people get back on their feet but they won't do it, it is not spent on education neither, it is not spent on science for sure.

It all goes to banks and wealthy so they won't go down because if they do than they take all the country with them. That is why I personally think that this will not end well but will make the countries economy go bigger, it will get better but for the wrong type of people.

[o_e_l_e_o]

My only point is that I wanted to point out it is not true the FED printed 125 Billions of USD. They didn’t .

You are correct here.

In addition to that 125 BLN is a drop in the ocean on the money market size. A market that is way bigger than Bitcoin (175 Billions) or the 125 billions equity derivative book of a single troubled German bank is trying to sell as we speak.

This wasn't the money market though. This was the federal funds markets, which is several orders of magnitude smaller. The fed funds market has been sitting at around $50-80 billion all year, so this represents a significant amount of money. I agree that this is unlikely to have any immediate effect on bitcoin price, but I disagree with you saying it is not an issue. Banks are currently overly relying on the fed to keep up with their liquidity and reserve requirements. The last time we saw this was in the run up to the 2008 crash.

[Oilacris]

Unfortunately, that type of money will be never seen by the regular folks and that's the problem.

When a new money printed it usually covers the "debts" of a nation or series of companies and that causes the real trouble, money out of thin air is not something central banks do to actually cover the costs of lets say medical bills of its citizens, that would help a lot of people get back on their feet but they won't do it, it is not spent on education neither, it is not spent on science for sure.

It all goes to banks and wealthy so they won't go down because if they do than they take all the country with them. That is why I personally think that this will not end well but will make the countries economy go bigger, it will get better but for the wrong type of people.

As usual and this is how the reality works and we cant able to stop them on how they do gonna supposed to used of those printed money out of nowhere.

Using it up directly for the sole purpose on taking down something wont really be that possible.There would be lots of priorities to think off rather than on
focusing into a single issue and its way too more obvious if they did that.

[fillippone]

My only point is that I wanted to point out it is not true the FED printed 125 Billions of USD. They didn’t .

You are correct here.

In addition to that 125 BLN is a drop in the ocean on the money market size. A market that is way bigger than Bitcoin (175 Billions) or the 125 billions equity derivative book of a single troubled German bank is trying to sell as we speak.

This wasn't the money market though. This was the federal funds markets, which is several orders of magnitude smaller. The fed funds market has been sitting at around $50-80 billion all year, so this represents a significant amount of money.

Here my source:

https://apps.newyorkfed.org/markets/autorates/fed%20funds

Fed funds overnight trades have been on that size for daily volumes. Fed funds market involves also longer term operations , or even different kind of trades, that aren’t accounted in that statistic.
Anyway: banks are screwed because of many other reasons! We do agree on this.

[o_e_l_e_o]

Fed funds overnight trades have been on that size for daily volumes. Fed funds market involves also longer term operations , or even different kind of trades, that aren’t accounted in that statistic.

I appreciate those are daily volumes. What I meant was that for pretty much the entire year, the daily volume has been sitting at around $50-80 billion. Apologies for not being clearer.

As you correctly point out, the federal funds market and the numbers given above and in your link also includes a number of other trades. This makes it even more concerning when there is sudden and unexpected loans of $75 billion being given out overnight. The banks are struggling, and we all know what happened last time that was the case.

[fiulpro]

I think it is highly unlikely that it's that much connected but since the banks are in debt maybe it is the government that is more or so affected and as far as I remember there is no government that is so involved with the bitcoins.

If this 5% down coincidentally coincides with this I don't think there might be any reason ... Their economy is going down not our Bitcoins ...it's global.

[hatshepsut93]

It seems counter intuitive because we've made ourselves think that Bitcoin is a hedge against fiat, but in order for that to be true a large portion market participants need to hold the same belief, which is not the case at this moment. Also Bitcoin's own volatility is far bigger than any correlations with fiat markets or politics or any other events - this volatility easily overshadows them. And this volatility is actually the reason why Bitcoin can't be a good hedge at this state - people are trying to avoid a loss on a magnitude of a few percents, with Bitcoin you can lose that value in one minute.

[Prettyme]

This is really amazing, the Federal Reserve just printed some more toilet paper money and injected it into the financial market and the Bitcoin price takes a 5% nose dive. 

How gullible are the investors that they would be willing to pull money out of their Bitcoin investments to fund investments in the over inflated stock markets. 

I think this is just another Bear trap in the making, because we all know what is going to happen on the 23rd of September, when Bakkt is going live!

Let's stay calm and ride this out, because I am definitely not going to sell my coins to greedy scumbags, who are just into Bitcoin for the quick profits. 

Do you think this is a Bear trap? Let's discuss...... 

It is possibly a bear trap since many of you has a lot of bitcoin investments and they want to take an advantage by means of printing more toilet paper money because with that many of investors got panic until they will now sell all their bitcoins. So i do hope that investors should smart enough on how are they going to play with this game.

[Decksperiment]

The point that it hasn't been necessary since 10 years has no implication whatsoever for financial stability.

I'm not so sure about that. The Fed having to do this to such an extent suggests a lot of banks are not meeting their fractional reserve requirements. Banks are no long funding their own debts with their own deposits, and instead they are relying on the federal reserve to bail them out on a nightly basis. Something has changed recently (we don't know what) to force the federal reserve to come in with $75 billion on a nightly basis to support the banks.

Banks should be able to support themselves. If they are experiencing daily shortfalls, then it can impact on other lending, which can impact on the entire economy. The Fed having to bail them out like this is a bad sign.

I bet this money printing issue with U.S. has a something to do with  countering China's indiscriminate printing of money and has long been accused of currency manipulation by the  U.S. Government. I think it has a noble cause.

Link: https://www.telegraph.co.uk/finance/economics/6146957/China-alarmed-by-US-money-printing.html

[fillippone]

Ok,
I found this BBG article.
I cannot link here the source because I think it is paywalled.

Code:

Repo Market's Liquidity Crisis Has Been a Decade in the Making

 
By Liz Capo McCormick, Matthew Boesler and Craig Torres

(Bloomberg) --
It sounds crazy: even National Public Radio is talking about repo rates.

In normal times, not even Wall Street thinks too much about the arcana of short-term money markets.
But over the past week, the Federal Reserve has had to work unusually hard to rein in a key policy rate after overnight repo lending dried up. Suddenly, everyone is asking the same question: what does it mean?
The answer is sobering. Despite assurances by the Fed and others to the contrary, the stress in the market for repurchase agreements, or repos, has exposed some fundamental weaknesses in the nation’s financial system which have been a decade in the making. While they don’t pose a significant problem during good times, the risk is clear: without a permanent fix, sudden cash shortages could lead to broader financial market turmoil in a downturn.

“The machine of liquidity management is just not oiled anymore,” GLMX Chief Executive Officer Glenn Havlicek, who runs a trading platform for repo securities and has four decades of experience in funding markets.

The repo market is important because it serves as the grease that keeps the global capital markets spinning. In a repo, firms borrow cash from each other by putting up securities like Treasuries as collateral. When the agreement expires, the borrower “repurchases” the collateral and returns the cash, though in practice repos are often rolled over day after day.

Hedge funds often use repos to finance purchases of higher-yielding assets, while dealers that are obligated to bid for Treasuries at U.S. debt auctions use them as a way to avoid putting up their own capital.

Participants point the finger at two structural changes that have drained too much cash from the system and made the repo market more prone to seizing up: crisis-era monetary policies and financial regulations designed to curb risk-taking. They contend that those two forces, rather than a mere confluence of technical factors, are what’s really behind this past week’s disruptions.

The first has to do with the unwinding of the Fed’s quantitative easing program, or QE. Simply put, after buying trillions of dollars of bonds to pump cheap money into the banking system, the Fed reversed course and started reducing its holdings (and thus draining cash) in October 2017 as the economy strengthened. It stopped altogether last month.

The problem is that, in reducing the asset side of its ledger, the Fed has also had to shrink its liabilities to balance its balance sheet. Those liabilities consist of currency in circulation, which has naturally increased with the economy, and bank reserves, which have fallen.

Of course, that in itself wouldn’t be enough to cause a scarcity of cash in the banking system since firms in aggregate still have over a trillion dollars in reserves. But because of post-crisis rules such as Dodd-Frank and Basel III, banks have been forced to set aside much of those same reserves to meet the more stringent requirements, putting a strain on the available cash they can use. What’s more, capital constraints have made taking large positions in short-term money markets far less lucrative.

“The Fed wanted the market to restructure to a new equilibrium and institutions to figure out how to fund themselves,” said Julia Coronado, president of Macropolicy Perspectives. But “if you have an excess reserve system, you are by definition a primary source of liquidity. And when you squeeze funding markets, you are usually squeezing hedge funds and other investors that may have to cut positions which can spark broader volatility.”

JPMorgan CEO Jamie Dimon summed up the conundrum last week, saying that “banks have a tremendous amount of liquidity, but also have a tremendous amount of restraints on how they use that liquidity.”

The swelling U.S. deficit caused by President Donald Trump’s tax cuts hasn’t helped matters. For one, the money that investors and dealers lend to the government in the form of bond purchases takes money out of the banking system. For another, dealers at Treasury auctions have increasingly turned from lenders to borrowers in the repo market to absorb the additional supply. This year, net issuance will reach roughly $1.2 trillion, after $1.3 trillion last year, according to JPMorgan. In 2017, it was less than half that.

Those liquidity constraints came into full view over the past few days when corporate tax payments, big Treasury auctions and maneuvers by financial firms to manage their capital requirements prior to quarter-end drained cash available for repo transactions. The overnight lending rate quickly shot up to 10% and the Fed temporarily lost control of its benchmark rate.

In the past, the Fed has disputed the idea that its balance-sheet unwind left bank reserves in short supply. And at his post-policy news conference on Sept. 18, Fed Chairman Jerome Powell sidestepped questions about whether he felt bank regulations were a catalyst for the market turmoil.

Instead, the Fed has opted for a temporary fix. On Friday, the New York Fed announced a series of overnight and term operations over the next three weeks to boost short-term liquidity. That follows four straight days of repo transactions, something it hasn’t done in a decade.

A number of investors, strategists and at least one former Fed official have come out to warn that more may need to be done.

“Maybe we have gotten some hints that reserves are no longer ample,” said Michael Feroli, JPMorgan’s chief economist. “The longer the Fed goes without making changes, the more often you might have these type of incidences.”

Earlier this year, TD Securities’ Priya Misra predicted the Fed would have to resume its bond purchases as a permanent solution. She says this past week’s events have convinced many of her skeptical clients have come around to the idea. They are now asking her “how much” the Fed will need to buy.

While no decisions have been made, Boston Fed President Eric Rosengren acknowledged last week that permanently expanding the Fed’s balance sheet is one option on the table and the one he personally prefers. (The other two being continued ad-hoc interventions or a so-called standing repo facility, which would make cash loans available on a daily basis.)

Growing the balance sheet might also be the easier one, particularly after the New York Fed stumbled out of the gate as it tried to come to the rescue on Tuesday, says GMLX’s Havlicek.

“The repo market isn’t used to being prime time,” in terms of liquidity management, he said. And, the Fed is “out of practice.”

[Leonardo7]

Printing more money to defend or try to absorb shock in the economy will always do more harm than good because economic Mafias will end up pocketing the money, and the impending crises may not have even be solved. Anyone shorting bitcoin to long shares in the stock exchange may regret their actions.

[o_e_l_e_o]

-snip-

The Fed's balance sheet was always less than $1 trillion prior to the 2008 crash. Since then it ballooned up to over $4 trillion due to the quantitative easing package, and only in the last couple of years has it started to be reduced. The most recent data (here: https://www.federalreserve.gov/releases/h41/current/) puts it at $3.8 trillion.

Rosengren has previously said he sees no problems with the Fed's balance sheet being so large:

He described the Fed’s post-crisis approach to monetary policy implementation as requiring a larger balance sheet.

Saying that was one thing, but now he is proposing to "permanently expand" the balance sheet even further. He makes no indication as to how much further it should be expanded. Another however many trillion created out of nothing to shore up the government and the banks? Great.

[fillippone]

The nonsense of a permanent of prolonged QE would be the most bullish BTCUSD signal ever.
Bullish bitcoin denominated in dollar, because it would be actually bearish for dollar, rather bullish for bitcoin.

[bryant.coleman]

As long as the US Dollar remains as the reserve currency of the world, the federal reserve can ask the United States treasury to print as much banknotes as they like. Despite the hype surrounding the new influx, the exchange rate for US Dollar went up against other currencies (such as the Euro and the Chinese Yuan) during the past few weeks. The Euro vs USD exchange rate went from 1.12 to 1.10. What this indicates is that while the USD is a bad currency, the other fiat currencies are even worse.

None of the fiat currencies in the world are backed up with any real assets (gold, silver.etc) and all of them are unprotected against inflation. Only Bitcoin is protected against inflation, thanks to the principle of controlled supply. But there are indications that the world is shifting away from fiat currencies. The gold prices are up by 20% so far this year. And Bitcoin is up by more than 200%. And in case the trade war between the US and China worsens, then we'll be witnessing even larger spikes for these assets.

[fillippone]

Apparently the FED is as puzzled as Bitcointalk.org forum about this move in STIRs.... this is definitely not a good sign.

Sorry again, I cannot link the original article source, as the come behind Bloomberg paywall.

Fed's Daly: Repo Strains Showed a Liquidity Distribution Problem
By Matthew Boesler

(Bloomberg) -- Federal Reserve Bank of San Francisco President Mary Dalysays strains last week in money markets didn’t arise because of a lack of liquidity but because liquidity wasn’t moving between banks as expected.
“Institutions behaved a bit differently than we had forecast that they would. So, what does that mean? We didn’t have a liquidity problem in the system. We had a distribution of that liquidity. And one of the things that was surprising is that institutions didn’t trade that liquidity with each other”
Daly answers audience questions after remarks at an event in Salem, Oregon, on Monday
“Liquidity wasn’t being moved around from one institution to another to balance it out, and then rates would surge, and so that necessitated our intervention”
“That was something that we’ll look back on and ask the question: have banks just simply lost the muscle, that they weren’t used to this? Or, is it something more material than that, that will affect how we think about going forward?”

Fed’s Williams Says Repo Turmoil Raises Question on Reserves (1)
Fed assessing implications for balance sheet, Williams says
Predecessor Dudley also sees new facility under consideration
By Matthew Boesler

(Bloomberg) -- Last week’s turmoil in money markets raises questions about the appropriate level of bank reserves in the financial system, Federal Reserve Bank of New York President John Williams said.
It is “important that we examine these recent market dynamics and their implications for the liquidity needs in relation to the overall amount of reserves held at the Federal Reserve,” Williams said Monday in a speech in New York.
John Williams
The New York Fed chief’s comments follow a week of volatility in money markets that was unprecedented in the years since the financial crisis. Short-term interest rates jumped amid the strain, pulling the U.S. central bank’s benchmark rate above the target range and forcing the New York Fed to intervene with overnight cash loans for the first time in a decade to quell the surge.
Read more: Repo Turmoil in Check as Fed Mounts Second Week of Operations
“We will continue to monitor and analyze developments closely,” Williams said, adding that officials “will assess the implications for the appropriate level of reserves and time to resume organic growth of the Federal Reserve’s balance sheet.”
That remark echoed a comment Fed Chairman Jerome Powell made to reporters at a press conference on Wednesday after the central bank cut rates for the second time in two months.
In the years after the crisis, the Fed expanded its balance sheet to $4.5 trillion through bond purchases designed to drive down long-term interest rates. From October 2017 through July 2019, it partially unwound its bond portfolio, draining cash out of the banking system in the process.
Last week’s turmoil -- which centered on the market for repurchase agreements, or repos -- put attention on whether the Fed went too far in shrinking its securities holdings, and when the central bank would begin resuming balance-sheet expansion to keep pace with the needs of a growing economy.
Williams’s predecessor, William Dudley, said during an interview Monday on Bloomberg Television that Fed officials will probably also seriously consider a new tool to contain short-term interest rates.
“They’ll increase the size of their balance sheet. So, they’ll start to buy Treasury securities again,” Dudley said. “And the second thing that they are going to strongly consider, I think, is introducing a standing repo facility, so whenever there is upward pressure on short-term rates, there is a facility that people can come to and do repo with, and that would sort of take away any risk of a big upswing.”(Updates with comments from former N.Y. Fed chief in eighth paragraph.)

Financial markets are a complicated issue, I wouldn't be so drastic as o_e_l_e_o theories, but this is somewhat disappointing for me. They are literally  groping in the dark: this is not what would you expect from a central bank that has been manipulating markets since 10 years!

<snip>
What this indicates is that while the USD is a bad currency, the other fiat currencies are even worse.

Very entertaining video related your very true statement.
HSBC's Bloom Says Dollar Is Best of Bad Bunch

[beerlover]

That won't go for too long if they keep printing too much money tho. Like yeah sure dollar is a global reserve thing right now but at the end of the day there is no way dollar could continue to lose value by printing more dollars and then still hope that nations would hold a currency that is constantly losing money on their reserves.

If a country realizes that the dollars they worked hard to save on the reserves worth nothing now, they will start focusing more on Euro and even Yuan if they can just to have a better future on their reserves, if they ever need dollars for something they would change exchange their euro for dollars for that job and then be done with it but not hold it. Hence, dollar needs to hold its value as long as possible .