After 18 months of tightening measures, the Fed is reportedly preparing to pause its quantitative tightening (QT) and may even initiate stealth quantitative easing (QE) once again.
Now, as the Fed is expected to end QT in 2025, VirtualBacon anticipates a similar surge for altcoins. The correlation is clear: when the Fed increases liquidity, altcoins tend to rise. The pressing question now is when exactly QT will come to a close.
The last notable instance of this was during the 2019 repo crisis, when banks faced immediate cash shortages, prompting the Fed to inject $75 billion into the financial system. Although Powell claimed it was “not QE,” it effectively was, and following that intervention, Bitcoin tripled in value within months.
Major financial institutions are already making predictions, with Goldman Sachs stating that the October meeting is the base case for QT to end, Bank of America expecting QT to cease by month-end, and Evercore indicating that the Fed is likely to signal an end to QT this week.
This shift would facilitate a return of liquidity to the markets, which historically has driven crypto prices. Liquidity acts as the fuel for market movements, and the Fed is poised to refill this tank.
The CME FedWatch tool currently indicates a 96.7% probability of a rate cut this month and an 87.9% chance of another cut in December. Powell recently hinted that QT would conclude “in the coming months,” signaling an imminent pivot.
This development indicates that Bitcoin’s next upward movement is already in the pipeline, albeit lagging behind the liquidity curve. Additionally, VirtualBacon forecasts that once the Fed pivots, a new altcoin season may commence.
Featured image from DALL-E, chart from TradingView.com
