Infinite QE dilemma—Federal Reserve's aggressive policies fail to stop the decline, but crypto assets surge in the opposite direction

In March 2020, the Federal Reserve launched an unprecedented unlimited quantitative easing (QE) measure, promising to buy bonds without limit to stabilize the market. However, this aggressive policy aimed at rescuing the economy did not reverse the downward trend of the US stock market as expected; instead, it triggered abnormal volatility in the cryptocurrency market. What underlying logic is hidden behind this policy shift?

The Fed’s “Hail Mary” Unlimited QE

Before the stock market opened, the Federal Reserve announced a second round of easing measures, deploying the ultimate weapon: unlimited QE. This policy was not only unprecedented in scale but also broke the previous cap on the amount of quantitative easing, symbolizing that authorities had no other means left when facing a market crisis. Following the announcement, the dollar weakened, and international gold prices rose, but market panic sentiment remained unresolved.

Investors began to worry that if the Fed faces even more severe financial challenges after unlimited QE, it could fall into a “desperate” situation. This concern over the central bank’s policy space became one of the key reasons for the market’s continued decline.

Traditional Markets React Calmly, US Stocks Still Not Recovered

Despite the Fed’s unprecedented rescue measures, the three major US stock indices continued to decline after opening. The Dow Jones Industrial Average once fell to 18,213.65 points, erasing all gains since Trump’s election; the S&P 500 dropped 67.52 points to 2,237.40; the Nasdaq fell 18.84 points to 6,860.67. The CBOE Volatility Index (VIX) expanded its gain to 7.8%, indicating that risk aversion remained high.

The failure of unlimited QE highlights the limitations of traditional monetary policy tools when facing systemic risks. The stalled $2 trillion US Congress COVID-19 relief plan further worsened investors’ pessimism about the economic outlook.

Gold and Bitcoin Surge Ahead

Contrary to stocks, traditional safe-haven assets like gold performed remarkably well. In April, gold futures closed up 5.6% at $1,567.60 per ounce, marking the largest single-day increase in history. This reflected investors’ deep concerns about currency devaluation.

More notably, Bitcoin’s performance stood out. Within just two hours, Bitcoin surged from $5,800 to over $6,600, an increase of more than 10%. At the time of writing, the price had reached $6,628.51. According to the latest data, Bitcoin has now risen to the level of $89.94K, reflecting the market’s increasing recognition of digital assets as a hedge against inflation.

Industry Consensus: The “Supply and Demand Dilemma” of Unlimited Money Printing

Charles Hoskinson, CEO of IOHK behind the Cardano blockchain, commented on Twitter, comparing the Fed’s unlimited QE policy to the well-known scam project OneCoin. He pointed out that the practice of unlimited money printing shares a similar “scam logic”—an infinite supply lacking real value support.

Anthony Pompliano, co-founder of Morgan Creek Digital, bluntly stated: “History tells us that this is not sustainable for currency.” His view exposes the fundamental dilemma of traditional monetary policy.

Binance CEO Zhao Changpeng also approached from basic economic principles, asking, “Have you heard of the relationship between ‘supply, demand, and price’? When you supply infinitely, what happens to the price?” His question directly points to the fatal weakness of unlimited QE—unlimited supply inevitably leads to currency devaluation.

Deep Reflection: Why Does Unlimited QE Boost Crypto Assets?

The reason why the Fed’s unlimited QE policy has driven up cryptocurrencies like Bitcoin fundamentally lies in market expectations of the loss of purchasing power of money. When central banks print money endlessly, the anchor of traditional currency value disappears, prompting investors to shift to assets with fixed supply for hedging—gold being one, and Bitcoin another.

This policy shift marks the traditional financial system’s recognition of new asset classes. In the era of unlimited QE, cryptocurrencies are no longer seen as marginal assets but as vital tools to counter inflation expectations. The market has voted with its actions, favoring assets with limited supply and independent value, which is undoubtedly the loudest protest against unlimited easing policies.