Battered Bitcoin Hopes for Fed Support, Bank of America Predicts End of QT
The expected end of quantitative easing could be a positive sign for BTC and other risk assets, although gains could be capped by stagflationary changes in the economic outlook.
Posted by: Omkar Godbole | Edited by: Parikshit Mishra Updated: March 19, 2025 14:24 UTC Published: March 19, 2025 07:47 UTC
Key points:
- The Federal Reserve (Fed) is expected to maintain its current interest rate range of 4.25% to 4.50%, with the focus on the future of quantitative tightening.
- The end of QT could signal the start of a new monetary regime that could potentially support risk assets, including BTC.
- However, growth could be limited by possible stagflationary changes in the economic outlook.
As Bitcoin (BTC) struggles to recover from its recent decline, analysts expect the Federal Reserve's (Fed) interest rate decision on Wednesday to provide support, with some arguing that the announcement of an end to the balance sheet reduction program known as quantitative tightening could be positive for the market.
The Fed will announce its rate review at 18:00 UTC, followed by a press conference by Chairman Jerome Powell half an hour later.
The Bank is unlikely to surprise markets on the interest rate front, keeping the current range of 4.25% to 4.50%. So the focus will be on how policymakers plan to continue the quantitative tightening programme, given concerns that it could impact liquidity in the system while the Treasury grapples with the ongoing debt ceiling issue. Markets will also be watching the economic forecast summary closely.
Since June 2022, the Fed has been gradually reducing its balance sheet under the QT program, which reached a record $9 trillion in the wake of COVID-19 as the bank purchased trillions of dollars in assets, including bonds, to support markets.
Minutes from the Fed's January meeting showed policymakers discussing the possibility of pausing or slowing the reversal of balance sheet expansion that has fueled the 2020-21 crypto bull market, so it's possible Powell will hint at something similar later today.
“Fed Chair Powell hinted late last year that QT would end in 2025. If he mentions it in a statement or press conference tomorrow (I assume someone will ask), it will ultimately mean that we are moving to a new monetary regime and that the Fed will be prepared to resume additional debt purchases if QE becomes necessary again,” Noelle Acheson, author of the Crypto Is Macro Now newsletter, wrote in Tuesday’s issue.
“While a resumption of QE is unlikely in the near term, additional liquidity from a large buyer (the Fed) returning to the market to replace maturing assets would be good news,” Acheson added, stressing that ending QE would be a timely move to avoid liquidity disruptions in the Treasury market.
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