Bitcoin has not grown at the rapid pace expected so far in the cycle, and some have attributed this to the Federal Reserve implementing quantitative tightening. This refers to a period in which the central bank reduces its money supply in an attempt to bring in excess liquidity. As a result, purchasing power appears to have fallen because there is not enough liquidity flows into risky assets like Bitcoin. However, this could all change very quickly if the Fed starts to change its stance.
Quantitative easing could provide more liquidity
After a long period of quantitative tightening, the Fed’s recent comments suggest there is a move toward quantitative easing. This is expected to happen sometime in December, and it could trigger a huge shift as the market looks to close for another year.
Quantitative easing is, as the name suggests, the opposite of quantitative tightening, and the former involves the Fed pumping liquidity into the market. This flow of liquidity could lead to investors taking more risks, and this in turn would be good for assets like Bitcoin as investors enter the crypto market for the long term.
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The announcement for a move to quantitative easing is expected to take place on December 1, and of course there have been debates about the impact on the Bitcoin price. Crypto analyst and investor Ted Pillows shared a chart showing that the last time the Fed ended quantitative tightening in 2019, Bitcoin price suffered a notable crash.
The report suggests this could be the case, as the Fed will take action in less than two weeks. However, this point was refuted by another crypto analyst, who pointed out the differences between what happened in 2019 and what is going on in 2025.
Why this time could be different for Bitcoin
In a response to Pillows, pseudonymous crypto analyst Sykodelic says outlined that one of the very first reasons why Bitcoin’s price won’t crash with the announcement of quantitative easing is the fact that the Fed overdid it in 2019. According to the report, the Fed overdid quantitative tightening, leading to the 2019 repo crisis.
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However, although reserves are low this time, they have not reached a danger zone. Furthermore, the analyst explains that the US, with a $2 trillion budget deficit, will have no choice but to stimulate the economy with liquidity or risk going bankrupt.
Since the The Bitcoin price already experienced a major dropwhere record-breaking MACD levels are reached, the analyst believes the chance of a decline is small. “If you bet on a bear market that will last a year, you are essentially betting on the US bankrupting itself,” the analyst said. “There is simply no more room for the Fed to turn around.”
Featured image of Dall.E, chart from TradingView.com