The Federal Reserve officially ended its quantitative tightening (QT) program on December 1st, freezing its $6.57 trillion balance sheet. The move signals a change in U.S. monetary policy that will have significant implications for Bitcoin and the broader crypto market.
summary
- The Fed ended its three-year quantitative tightening program and froze its balance sheet at $6.57 trillion.
- Bitcoin returned to the $90,000 area on December 2nd.
- Analysts say this change could be a tailwind for the cryptocurrency and mirrors the pattern seen after the QT outage in 2019.
The move ends a three-year streak in which the Fed drained $2.39 trillion from the financial system, the largest liquidity drain in history. Although financial outflows have now stopped, the Fed plans to continue reducing mortgage-backed securities by $35 billion each month. The decision came at a time when bank reserves remained near $2.89 trillion, a level officials feared could destabilize markets if QT continues.
Bitcoin (BTC) was trading at around $92,000 at last check on Dec. 2, down more than 16% in a month. Monday's selloff saw the liquidation of nearly $1 billion in leveraged crypto trades, highlighting how illiquidity increases volatility in risk assets.
Investors look for historical clues
When the Fed suspended QT in 2019, the market rose 17% within weeks, but Bitcoin initially fell about 35% before making a big rally in early 2020.
However, this cycle looks different. Interest rates have already been lowered to between 3.75% and 4.00%, the once-massive overnight reverse repo system has all but dried up, and institutional investor participation has surged. The Spot Bitcoin ETF currently holds more than $50 billion, with steady inflows from companies like BlackRock and Fidelity.
If history is any good, the Fed's policy shift could set the stage for a rebound. As Fundstrat's Tom Lee told CNBC, the QT outage is a “tailwind” for both Bitcoin and stocks heading into 2026.
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