This article is reprinted with permission from Huali Huawai, and the copyright belongs to the original author.

In the article on October 15, we discussed the topics of QT (Quantitative Tightening) and QE (Quantitative Easing). A few days ago (on October 30), the Federal Reserve clearly hinted in a statement that it would gradually end the quantitative tightening process starting from December 1.

Some may assume that as long as the Federal Reserve ends QT, the market will rise, but the reality may not be that simple.

As we discussed in previous articles, we believe that this change in QT can only be considered a mild bullish signal for Bitcoin, rather than a direct strong bullish signal. If we are to talk about a more direct bullish signal, further QE or fiscal policy stimulus may be needed. This is because the cessation of QT usually only means that liquidity is no longer tightening, not that QE is being restarted, and it certainly does not mean that liquidity will immediately expand. Historically, true strong bull markets (major bull runs) often occur during liquidity expansion (QE or fiscal stimulus phases).

Let’s continue to review the cycles of the Federal Reserve's QT & QE since the last two bull markets and the corresponding market conditions:

The first QT began in October 2017 and was paused in September 2019 after pressure in the overnight repo market.

The first QE started in March 2020 (the Federal Reserve initiated unlimited QE in response to the market and economic shocks caused by the COVID-19 pandemic) and continued until March 2022 when the Federal Reserve announced the end of quantitative easing (the Fed had gradually tapered since the end of 2021, officially stopping in March 2022).

The second QT began in June 2022, and last week (October 31), the Federal Reserve hinted that it would officially end the balance sheet reduction by December 2025.

To facilitate comparison, we have simply compared the BTC price movements with the QT & QE cycles, as shown in the figure below.

From the above figure, we can see an interesting phenomenon: every time the Federal Reserve announces the end of QT, the crypto market begins to decline, and only after the QE policy is restarted does the market enter a new upward cycle.

So, why does the crypto market start to decline every time QT ends?

To avoid misinterpretation of causality, we need to further elaborate: Generally speaking, market declines often occur due to a deterioration in the macroeconomic environment, which forces the Federal Reserve to end QT. In other words, the timing of the Federal Reserve ending QT often coincides with a stage where the economy is already showing (or may show) signs of weakness, which can lead to market declines. That is, ending QT is more a result of market declines rather than a direct cause of them.

At the same time, we may encounter a new question: When might the Federal Reserve restart a new round of QE?

We all know that typically, the Federal Reserve considers restarting QE only when the economy is severely deteriorating, short-term interest rates are nearly zero, or traditional policy tools are ineffective.

In fact, we mentioned in previous articles that if the Federal Reserve wants to restart QE, it will need to continue lowering interest rates to as low as possible. If they do proceed with this, given the current global economic situation, it may require a new economic disaster (for example, the previous COVID-19 pandemic was an economic disaster; a financial crisis would also qualify, but it is not to say that QE would only restart after such a level of disaster. If the U.S. economy shows clear signs of recession or severe liquidity tightening, the Federal Reserve may also restart QE) to achieve this. Moreover, simply estimating the time cycle, if the Federal Reserve wants to lower rates below 1%, it may take at least 8-10 months under relatively aggressive conditions.

Therefore, from this long-term macro perspective, the general operational thought we can provide remains unchanged: In the short term, the market still faces relatively high interest rates and liquidity pressures. However, if the economic data released by the U.S. in the coming months shows positive trends (such as PCE and core CPI maintaining a downward trend), and if expectations for new rate cuts by the Federal Reserve return, combined with other potential macro-positive factors (such as the results of U.S.-China negotiations), then we may still see new phase rebound opportunities in the coming months. However, when such phase opportunities coexist with risks, it is best to formulate a clear phased exit plan while retaining a portion of positions for long-term strategies based on personal risk preferences. Then, we should continue to be patient; we may see a new optimal entry time in the third or fourth quarter of 2026.

Of course, the above is only based on the current situation, retrospective analysis, and future speculation. In reality, no one can accurately predict future events, nor can anyone foresee what new impactful events or black swan events may occur. The future market direction will still depend on the changes in liquidity and the U.S. policy cycle.

Returning from the macroeconomic or policy level to actual trading behavior, the structural changes in the market itself also require our attention. Especially since this cycle, the main forces and behaviors driving the crypto market seem to have changed significantly. While ETFs and the U.S. Reserve Act have driven the bull market, they have also brought in more institutional funds, while the retail structure is continuously dissipating or weakening, and new whales are rising. In the next new cycle, we may witness more different occurrences, meaning that in the next cycle, we may see a completely different market structure.

Currently, the market gives us the impression that some institutions are still continuously buying and accumulating Bitcoin (and Ethereum), while some well-known figures and KOLs are promoting a long-term bull market. Retail investors seem to still hold hope, clinging to their high-entry positions without budging. Perhaps, for medium to short-term retail traders, in the coming months, we will continue to see more retail investors becoming the liquidity sacrifices for those institutions and big players, continuing to hand over more low-priced chips amid the market's violent fluctuations.

Here’s a simple example: many people are focused on how much Bitcoin MicroStrategy (MSTR) has bought again, but have you noticed a fact:

In November 2024, MSTR's stock peaked at $422, while BTC began to oscillate at high levels in the $90,000 - $100,000 range. In the following three months, MSTR experienced a 40% pullback, and BTC also fell from around $100,000 to about $80,000.

In July 2025, MSTR's stock once again peaked at $435, while BTC began to oscillate at high levels in the $100,000 - $120,000 range. Now (as of November 3, 2025), MSTR's price is $269, experiencing a 38% pullback from its peak. So, how do you think BTC will move next?

BTC is still the same BTC, and MicroStrategy's BTC reserves have been continuously increasing, but have you thought about a question: In this round of fluctuations and harvesting, where did the money evaporated from MSTR's stock end up? Where does MicroStrategy's increasing BTC reserves come from?

The market is ruthless; it does not give anyone brainless opportunities to make money for no reason. If you want to make money in a market over the long term, you should learn to do this: no matter how the market changes, as long as you still have confidence in the future of this market, then in long-term trading, we just need to have a general direction or thought, then customize our Plan A and Plan B, strictly manage our positions, ignore the noise, and maintain self-focus and iteration. This way, we can navigate the cycles more calmly.

Related: Sigma Capital: The four-year cycle of Bitcoin (BTC) has not disappeared; the next bear market is expected to drop by 70%.

Original article: “The Federal Reserve's Quantitative Tightening is Ending, So Why is the Market Still Falling?”

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