Key Takeaways
- •The Federal Reserve has ended quantitative tightening and begun injecting liquidity.
- •The first $13.5 billion repo operation signals easing conditions rather than crisis response.
- •Analysts expect crypto to benefit, though a potential BOJ rate hike may briefly slow momentum.
The argument is simple: when liquidity stops draining and begins expanding, risk assets eventually wake up.
A Sudden Injection Signals a New Phase
Immediately after shutting down QT on December 1, the Fed pumped $13.5 billion into the banking system through overnight repo operations. Liquidity events of that size have only appeared during moments of extreme financial stress in the past, such as the COVID-19 turmoil or the Dot-Com chaos. This time, the scale is not tied to a crisis but instead signals easing conditions ahead. Increased access to short-term funding usually cascades into stronger performance for risk-sensitive markets, including crypto.
The QT Ending Came Just as Crypto Pulled Back
Since June 2022, roughly $2.4 trillion has been withdrawn from the financial system. That trend is now over. Ironically, the Fed’s policy reversal arrived right after crypto experienced a sharp sell-off. Analysts say this is a classic setup for an early bull cycle: liquidity accelerates before sentiment improves. They warn that markets often rebound when traders least expect it.
Analysts Split on Timing of the Next Rally
Fundstrat’s Tom Lee has been vocal about what this shift could mean. He points to the last time the Fed ended QT, when markets rallied strongly within a few weeks. Based on that pattern, he believes Bitcoin could strengthen into early 2026 and potentially register a new all-time high by late January.
Not everyone thinks the breakout will be instant. The Bank of Japan has become the biggest wildcard. Each of its previous rate hikes has been followed by widespread selling in the crypto market, and now traders are watching closely as the odds of another BOJ hike in December surge. If it happens, analysts warn, it could briefly delay the bullish effects of the Fed’s liquidity pivot.
The Bigger Picture
Despite the short-term uncertainty, most analysts agree on one point: crypto responds more powerfully to U.S. liquidity conditions than to isolated foreign rate decisions. Once the BOJ event risk passes, markets are expected to begin pricing in the Fed’s policy shift — and history suggests crypto rarely stays quiet long after liquidity starts flowing again.
The information provided in this article is for educational purposes only and does not constitute financial, investment, or trading advice. Coindoo.com does not endorse or recommend any specific investment strategy or cryptocurrency. Always conduct your own research and consult with a licensed financial advisor before making any investment decisions.