Key Developments in Monetary Policy
The Federal Reserve has officially ended its quantitative tightening (QT) program, effective December 1, 2025, as directed by the Federal Open Market Committee, signaling a significant shift in monetary policy.
Ending QT halts liquidity drains, easing market conditions and benefiting risk assets, including Bitcoin and Ethereum, through improved dollar liquidity and potentially lower market yields.
FOMC Decision and Implementation
The U.S. Federal Reserve concluded its quantitative tightening (QT) program on December 1, 2025. This decision followed direction from the Federal Open Market Committee (FOMC) meeting held on October 29, 2025.
The FOMC directed the New York Fed to reinvest all principal payments, thus halting any reduction in securities holdings. Jerome Powell continues in his role as Chair. "On October 29, 2025, the FOMC announced that it would cease the runoff of its securities holdings starting on December 1, 2025," stated Jerome Powell, Chair of the Federal Reserve Board. This action is part of the broader Monetary Policy Normalization framework.
Market Impact and Liquidity Shift
The conclusion of QT is poised to influence macroeconomic conditions by possibly alleviating strain in dollar funding markets. This decision brings a notable liquidity shift into the markets.
Financial industries perceive this change as a bullish signal for both fixed income and risk assets. Cryptocurrencies like Bitcoin and Ethereum could see benefits as liquidity conditions evolve positively.
Market participants may observe favorable conditions for Bitcoin, Ethereum, and other cryptocurrencies. The decision is viewed as reducing pressures that could otherwise constrict market fluidity.
Historical Context and Future Outlook
Past instances, such as QT1 from 2017 to 2019, highlight how shifts in monetary policy influence asset classes. Changes in dollar liquidity and funding markets will impact cryptocurrencies, potentially heightening volatility and risk appetite.