I. The End of an Era and the Beginning of "Stability"
On December 2, 2025, a monetary policy tool aimed at combating high inflation—quantitative tightening (QT), which began in June 2022—was officially concluded. According to the Federal Reserve's decision from the October meeting, starting from this day:
The Federal Reserve will stop reducing the principal of maturing government bonds it holds and will extend all of them.
The principal of maturing agency mortgage-backed securities it holds will be reinvested in U.S. Treasury securities.
This means that the Federal Reserve's massive balance sheet will be frozen at approximately $6.6 trillion, no longer actively "sucking liquidity" from the financial system.
Key Interpretations:
Not "easing," but "stopping tightening": Deutsche Bank interest rate strategist Steven Zeng pointed out that this "will drive down repo rates and inject liquidity into the system," but its core goal is stability rather than stimulation. Goldman Sachs analysts also believe that the primary aim of this move is to alleviate tensions in the money market.
Paving the way for future policies: Barclays analyst team emphasized that this move "provides a buffer for the Treasury" and paves the way for potential future "organic purchases" or reserve management tools, demonstrating the coherence and foresight of the policy.
II. A Roller Coaster Market under Expectation Games
The implementation of the policy has staged a classic expectation game in the financial markets, especially in the liquidity-sensitive cryptocurrency market.
- Instant Euphoria and Emotional Reversal
Before and after the official announcement, the market briefly viewed it as a "easing" signal. Bitcoin's price retraced in a short time, with market sentiment swiftly switching from panic to greed. However, this euphoria did not last long.
- The Harsh Reality of "Buy the Expectation, Sell the Fact"
Since the decision to end QT was announced back in October, the market had digested this for over a month. When the good news was officially confirmed, it triggered the classic "buy the expectation, sell the fact" trade. Coupled with the strong interest rate hike signals released by the Bank of Japan's governor on December 1, market risk appetite sharply reversed. Bitcoin's price significantly retreated from its highs, plummeting about 4.52% in a single day, briefly falling below $84,000, nearly erasing all gains.
- Contradictory Signals from Liquidity Indicators
A noteworthy detail is that on the day QT ended, the usage of the Federal Reserve's standing repo facility surged to $26 billion, marking the second-highest level since 2020. Bloomberg columnist Jonathan Levin interpreted this as a "yellow flag signal for money market liquidity." This indicates that despite the end of QT, the deep-seated liquidity tension in the financial system has not been instantly resolved, and the market's demand for short-term funds remains strong.
III. The "New Anchor" and Old Risks in the Cryptocurrency Market
The Federal Reserve's policy shift is reshaping the pricing logic and risk structure of the cryptocurrency market.
- Providing a Macro "Policy Floor"
The most fundamental impact of ending QT is the removal of a macro headwind that has persisted for three years for global risk assets, including cryptocurrencies. It clearly conveys a message to the market: the tightening wave from the Federal Reserve has peaked. This establishes a relatively solid "policy floor" for the market, limiting the irrational downside caused by liquidity panic.
- Positive Emergence of Fund Flows
The change in policy expectations has begun to guide the direction of smart money. According to data from fund flow monitoring agencies, in the week when expectations for the end of QT heated up, global digital asset investment products (ETFs/ETPs) ended several weeks of outflows, recording a net inflow of approximately $1.07 billion. Among them, Bitcoin and Ethereum-related products were the main recipients. This indicates that institutional funds have begun to reassess and position themselves in crypto assets.
- Exposing Structural Vulnerabilities in the Market
However, this roller coaster market has also exposed the vulnerabilities within the cryptocurrency market:
High-Leverage Liquidation Chain: The sharp price fluctuations triggered a chain reaction of liquidations in the high-leverage derivatives market. According to AiCoin data, during the price crash, the total liquidation amount of cryptocurrency contracts across the network exceeded $400 million in a single day.
Increased Linkage with Global Policies: Cryptocurrencies can no longer operate in isolation. The simultaneous actions of the Federal Reserve's "dovish" stance and the Bank of Japan's "hawkish" stance have left the market in confusion, amplifying volatility. This proves that the cryptocurrency market has become part of the global macro narrative.
IV. Is the Path Ahead Smooth or Confusing?
Regarding the future market, opinions among Wall Street and cryptocurrency market analysts show significant divergence, focusing on the "quality" of the policy and the "endurance" of the market.
The "Cautiously Optimistic" camp believes that, similar to the positive market response after the end of QT in 2019, the improvement in liquidity will ultimately benefit risk assets. Long-term holders may find a window for positioning but need to patiently wait for liquidity to transmit to the market.
The "Long-Term Positioning" camp: They expect that early 2026 may see the restart of "organic purchases" for economic growth, which is a preparatory measure for the future. The true power of the policy may manifest in six months to a year, necessitating attention to long-term narratives.
V. Core Conclusions and Forward Tracking
In summary, the Federal Reserve's end of QT is a "ceremony" confirming a trend reversal, rather than a "rocket" driving prices to soar immediately. It changes the rules of the game but does not alter the fact that patience is required in the game.
For investors, there are two key observation points in the coming weeks that should not be missed:
Federal Reserve FOMC Meeting: The market has fully priced in rate cut expectations (probability over 87%). The focus of the meeting is no longer on "whether" to end QT, but on "whether" to initiate rate cuts and the Federal Reserve's forecast for the interest rate path in 2025 (dot plot). Any unexpected "hawkish" signals could trigger market turbulence.
Bitcoin's Challenge of the $92,000 Key Resistance: From a technical analysis perspective, $92,000 is a critical watershed for confirming the market sentiment shift from "rebound" to "recovery" trend. Whether it can effectively break through and stabilize will be a core test of whether this macro good news translates into real buying pressure.
Ultimately, the market's direction will depend on a simple formula: whether the liquidity "oxygen" provided by the Federal Reserve can overcome the "gravity" of high leverage within the market and offset the "headwinds" from other central bank policies. Until this formula yields a clear answer, euphoria and panic may be just a line apart.
Join our community to discuss and grow stronger together!
Official Telegram Community: https://t.me/aicoincn
AiCoin Chinese Twitter: https://x.com/AiCoinzh
OKX Benefits Group: https://aicoin.com/link/chat?cid=l61eM4owQ
Binance Benefits Group: https://aicoin.com/link/chat?cid=ynr7d1P6Z
免责声明：本文章仅代表作者个人观点，不代表本平台的立场和观点。本文章仅供信息分享，不构成对任何人的任何投资建议。用户与作者之间的任何争议，与本平台无关。如网页中刊载的文章或图片涉及侵权，请提供相关的权利证明和身份证明发送邮件到support@aicoin.com，本平台相关工作人员将会进行核查。
