BTC Holds Steady as Powell Signals End of Quantitative Tightening

Federal Reserve Chairman Jerome Powell indicated on Tuesday that the Fed may soon reach a point where its long-running quantitative tightening (QT) program could conclude. Despite this dovish signal, Bitcoin (BTC) and the broader crypto market remain under pressure, with derivatives showing persistent bearish sentiment.

Powell’s Remarks
“Our long-stated plan is to stop balance sheet runoff when reserves are somewhat above the level we judge consistent with ample reserve conditions,” Powell said in prepared remarks for the National Association for Business Economics conference in Philadelphia. “We may approach that point in coming months, and we are closely monitoring a wide range of indicators to inform this decision.”

QT, which began in 2022 to unwind emergency liquidity from the COVID-era balance sheet expansion, has reduced the Fed’s holdings from $9 trillion to $6.6 trillion. Powell emphasized that the central bank wants to maintain sufficient bank reserves to prevent disruptions in short-term funding markets and ensure financial stability.

Market Context
Markets are pricing in two 25-basis-point rate cuts by year-end, following September’s reduction, driving some bullish chatter on crypto social media. Yet, BTC remains largely unimpressed, trading near $112,600, almost flat over 24 hours.

Deribit options data show that one-week BTC puts, which provide downside protection, continue trading at a premium to calls, with similar bearish pricing extending to March 2026 expiries. Analysts note that the market may be signaling that an end to QT does not automatically equate to a rapid return to expansive monetary policies, such as those seen during the 2020–2021 crypto bull run.

Slowing Pace of QT
Since mid-2024, the pace of QT has slowed considerably. Monthly redemptions of Treasuries have been capped at $5 billion, with mortgage-backed securities capped at $35 billion, meaning the approaching end of QT is unlikely to trigger an immediate market surge.

“The key takeaway is that the Fed is likely to stop shrinking its balance sheet in the coming months, but the actual run rate has been modest, so the change is limited,” noted pseudonymous analyst Markets and Mayhem.

Broader Market Moves
Powell’s comments pushed bond yields lower, with the 10-year Treasury yield dipping to 4%. The dollar index fell to 98.75, remaining within last week’s range. Meanwhile, gold surged past $4,200 per ounce, and Nasdaq futures rose 0.7%, reflecting broader risk-on sentiment amid easing QT expectations.