The quantitative tightening has ended. Bitcoin is about to explode.

Compilation: Vernacular Blockchain

Quantitative tightening (QT) has ended.

The Federal Reserve will stop reducing its $6.6 trillion balance sheet on December 1. When was the last time they did this? Bitcoin is not just rising - it is surging. Everything is up: stocks, gold, altcoins, etc.

What do QE and QT actually mean?

When the Federal Reserve prints money, it is referred to as quantitative easing (QE). They buy bonds and inject cash into the system—risk assets go crazy as a result.

Quantitative tightening ( QT ) is the opposite. The Federal Reserve allows bonds to mature - funds leave the system. Credit tightens. Prices fall. The market collapses.

This situation has lasted for more than ten years.

Since 2008, the Federal Reserve has undergone several rounds of QE—injecting trillions of dollars while keeping interest rates low. In 2019, cash ran dry. Overnight, the repo market nearly froze. The Federal Reserve intervened, taking emergency measures similar to QE. Then came the COVID-19 pandemic in 2020. The Federal Reserve doubled down on comprehensive QE—the market went into a frenzy. By 2022, inflation reached the highest point in a generation. The Federal Reserve reversed its policy—aggressive QT and rapid rate hikes.

Whenever the Federal Reserve tightens, something always collapses. Whenever it loosens, assets soar.

What is happening now?

Every month, bonds worth $40 billion mature. The government pays the Federal Reserve. During QT, the Federal Reserve lets this money leave the system - it does not reinvest in bonds.

But starting from December 1, all of this will stop. The Federal Reserve will reinvest the maturing funds into bonds. This changes everything.

When QT ends, QE does not automatically begin—however, when you stop pulling funds out and start putting them back in, this is the “invisible” QE. As the Federal Reserve resumes bond purchases:

• Bond prices rise
• Yield rate decline
• Investors chase higher-risk assets — stocks, Bitcoin, everything.

Don't forget what happened last time.

After the outbreak of the COVID-19 pandemic, the Federal Reserve launched a $700 billion QE program and lowered interest rates to zero. From March 2020 to December 2021, the S&P 500 index surged more than 2,000 points. By the end of 2021, it had risen over 1,400%.

Then the Federal Reserve turned off the lights. QT began in June 2022. Liquidity disappeared. What followed was a bear market.

QE and QT are not just technical policy tools - they are the market's “on/off” switches.

We are experiencing a period of regulatory transition.

Interest rates are declining. QT is coming to an end. The system is shifting towards more liquidity. At any moment, the Federal Reserve may inject funds again.

What does this mean for Bitcoin

Bitcoin is the purest reflection of global liquidity. No financial reports. No price-to-earnings ratio. No company buybacks. Just a tick-by-tick indicator of how funds flow.

During the QE period of the COVID-19 pandemic, Bitcoin reached $69,000. Now, the situation in the market is even greater:

• The Federal Reserve's balance sheet is larger
• Heavier debt burden
• The interest burden has doubled.

When liquidity shifts - and it will - risk assets will react violently. Even under severe QT, stocks and Bitcoin reached new highs. So, what will happen when the Federal Reserve turns the taps back on?

That big problem

Will we see a new bull market as we welcome the most accommodative monetary policy in years? Or, more likely, are things about to get crazy?

Things always happen the same way: The Federal Reserve injects a large amount of money into the system. The market crashes (meltdown). The shock dissipates. Everyone thinks they have figured it out. Then - the cycle starts again.

This article link:

Source: