In short
- The end of the Fed’s quantitative tightening puts Bitcoin at a critical liquidity juncture.
- Short-term volatility aside, the crypto market is unlikely to repeat the post-Fed pivot scenario of 2019 amid higher interest rates and institutional demand, Decrypt was told.
- Favorable macro and geopolitical prospects could extend the bull run, analysts say.
The Federal Reserve’s decision to end its quantitative tightening program has put the crypto markets at a critical juncture, with investors wondering whether this pivot will reignite Bitcoin’s bull run or lead to a repeat of the post-2019 policy slump.
Federal Reserve Chairman Jerome Powell comments on Tuesday hinted at an end to the central bank’s balance sheet reduction, known as quantitative tightening.
The process is bullish for risky assets like Bitcoin, experts previously said told Declutter. However, the Fed’s pivot could be a double-edged sword.
Historically, such transitions have initially been associated with volatility, but have ultimately paved the way for capital flows into higher-yielding investments as the easing begins.
“Despite a 25 basis point rate cut, traders are dialing back expectations for further easing, now estimating a lower probability of another cut in December,” Riya Sehgal, research analyst at Delta Exchange, told reporters. Declutter. “ETF flows confirm the cautious tone, with Bitcoin funds seeing outflows of $197.5 million and Ethereum funds seeing $66.2 million.”
However, the current backdrop, with a US-China trade war and political pressure on the Fed, bears a striking similarity to 2019.
“The parallels are clear: rate pressure, political interference and a dovish Fed, but this time Bitcoin is at the center of global liquidity flows,” Ryan Lee, chief analyst at Bitget, told me. Declutter. “Unlike the pre-institutional market of 2019, the current crypto landscape could provide positive momentum rather than stress.”
“Things are very different from the 2019 liquidity cycle,” said Sean Dawson, head of research at on-chain options trading platform Derive. Declutterciting important differences in the macroeconomic setup.
Dawson highlighted that the current interest rate of around 4% is much higher than 2019’s 2.5%, meaning “there is more built-up energy in the markets that could flow into risky assets like Bitcoin if rates were to fall.”
An upcoming leadership change at the central bank, involving a replacement selected by Trump, is also likely to hasten interest rate cuts, the analyst added, suggesting this would create a “fiscally loose Fed” that would be “extremely beneficial to Bitcoin holders.”
While Lee acknowledged that US-China trade tensions and political pressure could create volatility in the short term and lead to a 10% to 15% correction for Bitcoin, he believes “the broader easing cycle is setting a supportive tone for risk assets.”
“Options traders are still clamoring for short-term insurance, a sign that fears of the October crash are fresh in the market’s memory,” Dawson noted, echoing Lee’s caution.
Despite the potential for short-term declines, both experts agreed that the long-term outlook is decidedly bullish, fueled by new regulatory and macroeconomic realities.
“We are truly in uncharted waters; the current administration is all about cryptocurrency adoption, coupled with the expectation of reduced rates, which bodes extremely well for Bitcoin,” Dawson said.
Fed easing is needed before Bitcoin can break out of the $105,000 to $115,000 trading range, the analyst said. He predicts a target of $200,000 for the third quarter of 2026, subject to favorable macroeconomic and geopolitical developments.
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