Bitcoin’s price growth has lagged expectations in the current cycle, with analysts citing the Federal Reserve’s quantitative tightening (QT) as a key factor. QT involves the Fed reducing the money supply to curb excess liquidity, which can limit investors’ ability to buy risk assets, including cryptocurrencies like Bitcoin. However, this dynamic may shift soon as the Fed signals a move toward quantitative easing (QE).
Quantitative Easing Could Boost Bitcoin
After a prolonged period of QT, recent Fed commentary suggests QE could start in December, injecting liquidity into the market. Unlike tightening, QE increases the money supply, potentially encouraging investors to take on more risk. For Bitcoin, this could translate into renewed long-term buying interest as capital flows back into crypto.
The anticipated QE announcement is expected on December 1, and analysts have debated its potential impact on Bitcoin. Some have warned that, similar to 2019 when QT ended, Bitcoin could face a temporary crash. Crypto analyst Ted Pillows highlighted a historical chart showing a notable Bitcoin dip when QT concluded in 2019.
Why Bitcoin Could Avoid a Crash This Time
Pseudonymous crypto analyst Sykodelic argues that conditions in 2025 differ significantly from 2019:
- Fed’s Tightening Was More Severe in 2019 – The 2019 repo crisis followed an aggressive QT cycle. Current reserves are low but not at a critical level.
- High Fiscal Deficit Requires Stimulus – With a $2 trillion fiscal deficit, the U.S. is likely to inject liquidity into the economy, reducing the chance of a market crash.
- Bitcoin Already Experienced a Major Drop – Technical indicators, including record-breaking MACD levels, suggest limited downside risk.
Sykodelic concludes:
“If you are betting on a year-long bear market, you are basically betting that the USA will let itself go broke. There is simply no room left for the Fed to turn.”
In short, the potential shift from QT to QE could provide a favorable environment for Bitcoin, offering liquidity-driven support and mitigating the likelihood of a major price drop.