The Federal Reserve is poised to conclude its three-year quantitative tightening phase this week, aiming to alleviate money market pressures amid recent banking system liquidity concerns.
Ending QT could stabilize markets, improve liquidity, and potentially boost cryptocurrencies like Bitcoin and Ethereum amid heightened investor optimism.
Fed's $2 Trillion Asset Roll-Off and Market Impact
Market reactions reflect a positive shift as equities rise and bond yields drop, anticipating a return to easier monetary conditions. According to Arthur Hayes, a Fed QT pause traditionally signals increased liquidity and market volatility, presenting opportunities for cryptocurrencies. BTC and ETH prices are expected to gain from enhanced USD liquidity, while DeFi TVL may see notable growth.
According to market experts, the end of quantitative tightening is expected to lead to a more favorable environment for risk assets, including cryptocurrencies. This shift may encourage increased investment and innovation in the crypto sector.
"The strategy’s role in stabilizing money markets and supporting future liquidity through tools like the Standing Repo Facility (SRF)." — Jerome Powell, Chairman, Federal Reserve
How the 2019 QT Halt Sparked Crypto Surges
In 2019, the last major halt of quantitative tightening led to significant rallies in risk assets, including a notable increase in crypto inflows and record highs in DeFi total value locked and staking metrics.
Bitcoin (BTC) is currently valued at $113,795.52 with a market cap of $2.27 trillion, constituting 59.15% market dominance, according to CoinMarketCap. Its trading volume over the past 24 hours is at $58.22 billion, experiencing a 17.53% change, and has seen varied price changes across different time frames, notably a 5.51% rise over the past week.
Coincu research suggests that the halt in QT could reduce financial pressures and stabilize liquidity. Improved market conditions may lead to increased investment activities in both traditional and cryptocurrency sectors, boosting innovation and strategic developments across related technologies.