Bitcoin Surges 7% as Fed Concludes QT: Are All-Time Highs on the Horizon?

Summary: The U.S. Federal Reserve has officially ended its Quantitative Tightening (QT) program, a significant decision that may positively impact Bitcoin. This shift suggests a new phase of liquidity expansion, which could lead to increased market activity and better conditions for cryptocurrency growth. Industry experts and analysts are weighing in on what this might mean for Bitcoin's future, including potential volatility in the coming months.

Key Takeaways

The U.S. Federal Reserve has ended its QT program, marking the beginning of liquidity expansion, which typically benefits Bitcoin.
Experts believe this could lead to increased market participation and potential price rallies for Bitcoin as seen in past cycles.
Caution is advised as volatile market conditions may lead to short-term price drops in Bitcoin, especially around mid-December.

US and Bitcoin

Understanding the Impact of the Fed's Decision on Bitcoin

The U.S. Federal Reserve's conclusion of its Quantitative Tightening (QT) program could redefine how Bitcoin and other assets perform. This critical move indicates a newly established phase of liquidity expansion, which historically has driven stronger market rallies for both conventional stocks and cryptocurrencies.

As part of this transition, the Fed infused over $13 billion into the banking system through overnight repo transactions. This action ranks as the second-largest liquidity adjustment by the Federal Reserve since the onset of the coronavirus pandemic in 2019.

How Will This Affect Bitcoin?

The news quickly circulated throughout the financial community, prompting insights from notable figures in the crypto space, including Binance co-founder Changpeng Zhao (CZ). Many industry leaders agree that the Federal Reserve's decision could lead to increased market activity, easier access to capital, and upward momentum for Bitcoin's price. Previously, market conditions have shown similarities to past cycles where increased liquidity was followed by significant crypto rallies.

Tom Lee, Chairman of BitMine, shared with CNBC’s Squawk Box that Bitcoin surged nearly 20% in the weeks after the Fed's last conclusion of QT. He predicts that Bitcoin may see similar gains this time, possibly gearing up for a stronger performance before the year's end.

The Bull Theory also commented on the Fed's latest decision, drawing parallels to late 2019 when repo spikes preceded tighter liquidity before the pandemic. If such spikes continue, Bull Theory believes the Fed might adopt some monetary easing measures by early 2026. While it won't replicate the expansive Quantitative Easing we saw in 2020, it would still provide meaningful liquidity support to financial markets.

In light of the anticipated rally, market analyst Sykodelic advises crypto enthusiasts to remain collected after the Fed's announcement. He asserts that while the outlook for Bitcoin is generally positive, an immediate surge should not be expected.

Caution Ahead: Potential Bitcoin Price Drops

Despite the excitement around a potential Bitcoin price increase, Benjamin Cowen, founder of Into The CryptoVerse, advises investors to exercise caution. He highlighted that the market could face a scenario where the Federal Reserve cuts interest rates while the Bank of Japan (BOJ) raises its rates later this month. Cowen pointed out that a similar situation unfolded in July 2024, resulting in extreme volatility and a significant sell-off in Bitcoin, with the market bottoming out a week later.

With similar conditions anticipated around December 10, involving expected Fed rate cuts and a potential BOJ rate hike, Cowen warns that Bitcoin may experience similar pressure. Should these patterns repeat, the market might witness a short-term capitulation followed by a rebound, potentially leading to a Bitcoin bottom in mid-December.

Chart by Benjamin Cowen

Current Bitcoin Price Movement

At the time of this report, Bitcoin has responded positively to the latest Federal Reserve announcement, climbing 7.33% within a day and briefly trading at $84,000 yesterday.

Bitcoin price chart

Disclaimer: This article is intended for informational purposes only and should not be considered financial advice. The views expressed herein reflect the author's personal opinions and do not necessarily represent those of The Crypto Basic. Readers are encouraged to conduct their own thorough research before making any investment decisions. The Crypto Basic is not liable for any financial losses.