Is the Crypto Market Missing the Bigger Picture on Quantitative Tightening?
Despite Federal Reserve Chairman Jerome Powell hinting that the central bank's quantitative tightening (QT) program might soon wind down, Bitcoin (BTC) and the broader crypto market remain stubbornly bearish. But here's where it gets controversial: could this persistent negativity be overlooking a crucial shift in monetary policy? Let’s dive in.
Powell, speaking at the National Association for Business Economics conference in Philadelphia, signaled that the Fed’s balance sheet reduction—which has shrunk from $9 trillion to $6.6 trillion since 2022—may be nearing its end. “Our goal is to stop the balance sheet runoff when reserves are somewhat above the level we consider ample,” Powell explained. He added, “We may approach that point in the coming months, and we’re closely monitoring indicators to guide this decision.”
And this is the part most people miss: Powell’s comments aren’t just about stopping QT; they’re about avoiding a scenario where bank reserves dip below a level that could destabilize short-term funding markets. In other words, the Fed is walking a tightrope—aiming to maintain financial stability without triggering another round of excessive liquidity, like the one that fueled the crypto bull market during COVID.
Yet, BTC seems unimpressed. At the time of writing, the leading cryptocurrency traded near $112,600, flat over 24 hours. Derivatives markets, particularly Deribit-listed options, continue to price in bearish sentiment, with one-week puts trading at a premium to calls. Even options expiring in March 2026 reflect this pessimism.
Here’s the controversial take: While some crypto enthusiasts might hope the end of QT signals a return to easy money policies, the reality is more nuanced. The pace of QT has already slowed significantly since mid-2024, with the Fed capping monthly Treasury redemptions at $5 billion and mortgage-backed securities at $35 billion. So, the end of QT isn’t necessarily a game-changer for crypto—it’s more of a return to neutral territory.
As pseudonymous analyst Markets and Mayhem noted on X, “The QT program ending soon isn’t a huge surprise. The balance sheet reduction rate was already minimal, so this isn’t a dramatic shift.”
Meanwhile, Powell’s dovish tone did impact other markets. Bond yields fell, with the 10-year Treasury note dropping to 4%, while the dollar index slipped to 98.75. Gold, however, surged to new highs above $4,200 per ounce, and Nasdaq futures rose 0.7%.
So, what does this mean for crypto? The market’s bearish stance might be overestimating the impact of QT’s end. But it also raises a thought-provoking question: Is the crypto market too focused on monetary policy shifts, or should it be paying more attention to other factors, like regulatory developments or technological advancements?
Let’s take a step back and look at some broader trends. In September 2025, crypto trading volumes fell 17.5% to $8.12 trillion, marking the fourth consecutive year of September slowdowns. Yet, open interest hit a record high of $230 billion, suggesting underlying strength in the derivatives market. Altcoins like SOL and XRP outperformed Bitcoin and Ether on the CME, highlighting shifting dynamics within the crypto ecosystem.
And in a surprising move, Coinbase rolled out its ‘Blue Carpet’ program, offering streamlined listings and perks for issuers. Just 33 minutes later, Binance’s BNB token was added to Coinbase’s roadmap—a notable gesture given the fierce rivalry between the two exchanges. While listing isn’t guaranteed, the signal is hard to ignore.
Here’s the bottom line: The end of QT might not be the bullish catalyst crypto bulls are hoping for, but it’s also not a reason to stay bearish. The market’s reaction could be a reminder to focus on fundamentals rather than overreacting to monetary policy tweaks. What do you think? Is the crypto market missing the bigger picture, or is this bearish sentiment justified? Let’s discuss in the comments!
