The Federal Reserve’s anticipated rate cut on Wednesday is nearly certain, but ending quantitative tightening (QT) could serve as the primary Bitcoin catalyst by signaling higher inflation tolerance, boosting liquidity and supporting crypto assets like Bitcoin trading around $114,850.
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Fed rate cut probability exceeds 90% according to prediction markets, potentially fueling liquidity growth into 2026.
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Ending QT reverses money reduction in the system, acting opposite to quantitative easing and creating tailwinds for risk assets.
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Bitcoin holds steady at $114,850 with minimal 24-hour decline, while Ethereum stays above $4,100, up 2.7% weekly per CoinGecko data.
Explore how the Fed’s rate cut and potential QT end could ignite Bitcoin’s bull run amid rising inflation signals. Stay ahead in crypto—read expert insights now.
What Impact Will the Fed Rate Cut Have on Bitcoin?
The Federal Reserve’s expected Fed rate cut on Wednesday is poised to inject further liquidity into markets, benefiting Bitcoin by encouraging risk-on investments after investors have largely priced in the move. Historically, such cuts have supported crypto assets, with Bitcoin maintaining stability around $114,850 despite a slight 0.1% dip. Ending quantitative tightening could amplify this effect by implying greater tolerance for inflation near 3%, as noted by financial analysts.
How Does Ending Quantitative Tightening Boost Crypto Markets?
Quantitative tightening involves the Federal Reserve allowing its bond holdings to shrink, thereby reducing money supply to combat inflation—the reverse of quantitative easing, where the central bank buys bonds to increase liquidity. Experts like Dr. Andre Dragosh, head of research at Bitwise, explain that terminating QT would signal a shift toward easier monetary policy, fostering higher inflation expectations that historically drive demand for Bitcoin as an inflation hedge. According to Bank of America and JP Morgan analyses, this policy pivot is likely in the coming months, with past announcements like QE1 and QE2 leading to notable rises in inflation outlooks, as detailed in Bitwise’s Crypto Market Compass report. For crypto traders, this creates a supportive environment, extending the bull market potentially into 2026, especially if U.S.-China trade tensions ease, evidenced by recent gold sell-offs indicating risk-on sentiment.
Frequently Asked Questions
What Are the Chances of a Fed Rate Cut This Wednesday?
Prediction markets like Myriad show a 90% probability of a 25-basis-point Fed rate cut on Wednesday, reflecting conservative trader sentiment. The CME FedWatch Tool, based on futures data, indicates an even higher 97.8% chance, with an 89% likelihood of another cut in December, underscoring broad market consensus for policy easing.
Why Might Ending QT Be More Significant for Bitcoin Than the Rate Cut?
Ending quantitative tightening would reverse the Fed’s money reduction strategy, boosting overall liquidity and signaling tolerance for inflation closer to 3%, which acts as a stronger tailwind for Bitcoin than a standard rate cut alone. As Dr. Andre Dragosh from Bitwise notes, this could extend the crypto bull market by accelerating global liquidity growth, making it a pivotal catalyst for assets like Bitcoin and Ethereum.
Key Takeaways
- High Rate Cut Certainty: Markets price in a 90-98% chance of a 25-basis-point cut, supporting crypto stability as Bitcoin trades flat at $114,850.
- QT End as Catalyst: Signals higher inflation tolerance, creating liquidity tailwinds that could propel Bitcoin’s bull run into 2026, per Bitwise research.
- Risk Management Essential: Watch U.S.-China trade developments and Bitcoin’s $111,000-$115,000 range; adjust positions if Fed messaging shifts unexpectedly.
Conclusion
As the Federal Reserve approaches its Wednesday decision, the near-certain Fed rate cut combined with the potential end to quantitative tightening positions Bitcoin for renewed momentum, driven by enhanced liquidity and inflation tolerance signals. Analysts from institutions like Bank of America and JP Morgan, alongside experts such as Dr. Andre Dragosh of Bitwise and Jonathan Rose of BlockTrust IRA, emphasize cautious positioning amid these shifts. Investors should monitor key levels and policy nuances to capitalize on this evolving landscape, potentially sustaining crypto’s growth trajectory well into the future.
