Fed to End QT and Cut Rates—What It Means for Cryptos

In just three days, the Federal Reserve is set to make a critical policy change, marking a potential turning point for the financial markets. This shift includes the end of Quantitative Tightening (QT) and is expected to closely mirror the central bank’s actions in 2019.

The anticipation surrounding this policy change has led analysts to speculate on how these shifts could affect various markets, including cryptocurrencies.

Dan Gambardello, a well-known cryptocurrency analyst, shared his insights in a recent video podcast on X (formerly Twitter), where he compared the current economic situation with that of 2019.

According to Gambardello, key cryptocurrencies such as Chainlink ($LINK), Cardano ($ADA), and XRP saw substantial price increases after the Fed pivoted and ended QT back in 2019. He predicts that similar market conditions today could lead to comparable movements.

Economic Data Supports Potential Rate Cut

As the year progresses, macroeconomic data continues to suggest that a shift in the Federal Reserve’s policy is imminent. On Wednesday, J.P. Morgan adjusted its forecast, now expecting the U.S. central bank to cut interest rates by 25 basis points in December, a change from previous expectations.

This decision is largely influenced by weaker job growth and signs of reduced inflation, factors that are critical in guiding the Fed’s future decisions.

Key officials, including John Williams, New York Fed President and Vice Chair of the Federal Open Market Committee (FOMC), have signaled that the Fed is likely to act sooner than initially anticipated.

Investors are taking note of these signals, with the CME FedWatch futures index showing an 85% probability that the Fed will lower rates to 3.5% in its final meeting of 2025.

Cryptocurrencies and Stocks Could Benefit from Rate Cut

The shift in Fed policy is expected to have far-reaching effects across various asset classes, particularly cryptocurrencies and stocks. The end of QT and the anticipated rate cut generally create favorable conditions for higher-risk assets like stocks and digital currencies.

When the central bank reduces interest rates, it makes borrowing cheaper, stimulating investment and potentially driving up asset prices.

As Gambardello pointed out, key cryptocurrencies such as Chainlink, Cardano, and XRP saw significant gains following the last Fed policy change in 2019. Chainlink, for example, rose from $2 to $13, while Cardano moved from $0.05 to $0.40.

XRP increased from $0.29 to $2. These examples highlight the potential for substantial market movements under similar macroeconomic conditions today.