Federal Reserve Concludes Balance Sheet Reduction
The Federal Reserve concluded its balance sheet reduction on December 1, 2025, signaling a shift in U.S. banking toward liquidity stress as reserve levels hit historic lows. This decision marks the end of the Federal Reserve's quantitative tightening (QT) program, a move that could have significant implications for financial markets.
The Federal Reserve Board made the official decision to conclude its quantitative tightening (QT) effective December 1, 2025. This decision, confirmed by the Federal Open Market Committee, aims to address evolving signs of liquidity stress in financial systems. Reserve balances have dropped significantly since March 2025.
Ending QT signals a shift towards managing balance sheet sizes to ensure reserve levels are sufficiently ample. By concluding the reduction of all securities holdings, the Fed aims to maintain economic stability and reduce stress indicators, particularly among banking institutions.
"The Committee decided to conclude the reduction of its aggregate securities holdings on December 1," said Jerome Powell, Chair of the Federal Open Market Committee.
Anticipated Impact on USD Liquidity and Crypto Markets
The conclusion of QT is expected to lead to an annual balance sheet growth of approximately $400 billion. This anticipated easing of U.S. dollar liquidity could positively impact crypto risk sentiment, potentially leading to increased valuations for digital assets.
The Federal Reserve's QT program began in 2022 with the objective of reducing excessive liquidity. Its initial phase, QT1, concluded in 2019 following stress in funding markets, which subsequently resulted in broader impacts across both traditional and cryptocurrency asset markets.
Insights from Coincu's research team suggest that the end of QT may stimulate a renewed interest in risk assets. Historical trends imply that an increase in USD liquidity could facilitate higher valuations for assets like Bitcoin and Ethereum, potentially boosting broader cryptocurrency market performance.
As of December 9, 2025, Bitcoin (BTC) was trading at $90,499.01. Its market capitalization was approximately $1,806,329,115,525, with a 24-hour trading volume of $57,177,106,298. BTC's dominance stood at 58.58% amidst broader market trends.