Key takeaways:
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The Fed ending QT and reinvesting in T-bills quietly boosts liquidity.
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Analysts are divided over how this affects BTC price, with bulls anticipating a $180,000 top.
Bitcoin (BTC) dropped 3.67% to $107,925 after the Federal Reserve announced a 25-basis-point rate cut and confirmed plans to conclude its balance-sheet runoff starting in December, effectively signaling the end of quantitative tightening (QT).
How could the end of QT impact Bitcoin price?
Starting Dec. 1, the Fed will stop allowing its bond holdings to shrink and begin reinvesting maturing debt into short-term Treasury bills (T-bills).
In simple terms, when the Fed’s old bonds get paid back, instead of destroying that money (shrinking its balance sheet), it’ll use the funds to buy new short-term government debt.
Bitcoin fell 35% after the Fed ended QT 2019 and rate cuts began, according to data highlighted by analyst Brett. That is despite growth in US stock markets at that time, which typically move in tandem with BTC.
The Bitcoin market didn’t recover until the Fed launched full-scale quantitative easing (QE) in early 2020, amid concerns about COVID-19.
“I would say we’re at peak of the 4 year cycle now though…which may not be any better,” Brett said, adding:
“If we get QE, I don’t see it happening until late next year.”
Meanwhile, some signs of a potential bear market starting are being noticed. Analyst Jesse Olson pointed to a “pending bearish MACD crossover” on Bitcoin’s three-week chart, a technical signal that preceded a 69% market correction in 2021-2022.
Therefore, if history repeats, then Bitcoin faces downside risks before any new liquidity-driven rally emerges.
Fed’s stealth QE may help BTC get to $180,000
Economist Lyn Alden said the Fed’s decision to reinvest maturing debt into T-bills effectively creates new money, even if the agency avoids calling it QE.
When the Fed injects cash into the financial system by buying T-bills, it effectively grants more cash reserves to the sellers of those Treasurys (banks, funds). More reserves mean more liquidity available to be deployed into markets.
Bitcoin’s price may climb further toward $130,000-$180,000 range by 2026, according to analyst Bedouin, who said that growing liquidity is overriding BTC’s four-year cycle concerns.
Related: Bitcoin price to 6X in 2026? M2 supply boom sparks COVID-19 comparisons
That aligns with year-end BTC price targets shared by top Wall Street institutions earlier this year, including JPMorgan and Standard Chartered.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
