Main Highlights:
The cessation of QT by the Fed and its subsequent reinvestment in T-bills subtly enhances liquidity.
Market experts have differing opinions on how this will influence BTC price, with some predicting a peak at $180,000.
Bitcoin (BTC) decreased by 3.67% to $107,925 following the Federal Reserve’s announcement of a 25-basis-point rate reduction and its confirmation to conclude balance-sheet runoff in December, signaling the end of quantitative tightening (QT).
Potential Effects of QT’s End on Bitcoin Price
As of December 1, the Fed will halt the reduction of its bond holdings and start reinvesting maturing debts into short-term Treasury bills (T-bills).
In simple terms, when the Fed’s older bonds are repaid, rather than shrinking its balance sheet, it will use the proceeds to acquire new short-term government debt.
According to data from analyst Brett, Bitcoin experienced a 35% decline after the Fed ceased QT in 2019 and began rate cuts, all while the US stock markets were growing, which generally aligns with BTC movements.
The Bitcoin market only began to recover when the Fed implemented extensive quantitative easing (QE) in early 2020 due to concerns surrounding COVID-19.
“I believe we’re at the peak of the four-year cycle now…which might not yield better results,” said Brett, adding:
“If we anticipate QE, I don’t foresee it happening until late next year.”
Simultaneously, some indicators suggest a potential onset of a bear market. Analyst Jesse Olson noted a “forthcoming bearish MACD crossover” on Bitcoin’s three-week chart, a technical signal that preceded a 69% market decline in 2021-2022.
Thus, if historical patterns hold, Bitcoin could face downward risks before any new liquidity-driven surge occurs.
The Fed’s Discreet QE Could Propel BTC to $180,000
Economist Lyn Alden asserted that the Fed’s choice to reinvest maturing debt into T-bills essentially creates fresh money, even if the organization refrains from labeling it QE.
When the Fed injects funds into the financial system by purchasing T-bills, it effectively provides additional cash reserves to the sellers of those Treasuries (banks, funds). More reserves imply greater liquidity that can be funneled into markets.
Analyst Bedouin suggested that Bitcoin’s price may escalate further toward the range of $130,000-$180,000 by 2026, with increasing liquidity overshadowing concerns related to BTC’s four-year cycle.
Relevant: Could Bitcoin’s price reach 6X in 2026? M2 supply surge invites COVID-19 analogies
This aligns with the BTC price projections for year-end shared by major Wall Street firms earlier this year, including JPMorgan and Standard Chartered.
This article does not offer investment advice or recommendations. Every investment and trading decision entails risks, and readers are encouraged to perform their own research.
