QE3 has been terminated for more than 2 months, and we are already seeing crash in almost every commodity and other currency in the world. In 2007, FED stopped stimulant, then after a little over a year, a liquidity crisis finally hit housing market and brought financial crisis. It seems this time FED has much less time and room to maneuver
The Rational Expectations theory can explain this: If everyone knows that when FED print then economy get some support and when FED stopped printing the economy will go bad, then it is better sell after QE stopped. After several run, everyone has learned the trick, then the stimulant will not work any more
But, when there is a shortage of USD now, will bitcoin become a liquidity provider?
For example, companies want to sell products, but buyers do not have USD any more, but they have bitcoin, so that is also some kind of transaction medium for the company, then this income can be used to improve the liquidity situation of the company. They can sell the coin in exchange for those already very limited USD, but that will just lower the bitcoin value, thus make the liquidity situation worse. So they might just spend bitcoin so that it does not affect the exchange rate, and the overall liquidity situation will improve
An extreme situation will be that FED start to sell assets and further reduce the money supply, then very quickly there will be no money in the banking system, if everyone has no money, then many thing's price will crash to zero. But now people have another option to use bitcoin to do transactions, so they will not need to sell assets for USD, thus there will be no crash of the housing market, oil, etc...
