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On Tuesday, February 19, the Federal Reserve released their meeting minutes, which shows that central bankers are an end – or at least an important delay – to quantitative tightening (QT). The document states: “Different participants propose to stop or delay the balance reduction pending the resolution of the debt ceiling.”
These comments have fed optimism among Bitcoin experts who regard the potential end of QT as a bullish signal. Many see it as a precursor of greater liquidity that concerns financial markets, a condition that is historically for the benefit of risk assets such as cryptocurrencies.
The newly published minutes confirm that certain FED officials are concerned about the interaction between the current balance reduction and the imminent debate about debt ceiling. The possibility of large-scale US Treasury issue Once the debt ceiling has been resolved seems to be an important driver behind calling to pause or stop QT.
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There has been no explicit shift to quantitative relaxation (QE) announced, but the recognition that the balance reduction could be limited is sufficient to heat speculation in digital activa birks. The minutes must be unanimously approved by the Federal Open Market Committee (FOMC), which also suggests a deliberate message of policy makers.
Implications for Bitcoin
Renowned market commentator and host of the on the Margin Podcast, Felix Jauvin, went to X to emphasize the meaning of the signaling of the Fed, writing: “There it is, QT will end this spring. Reminder that every FOMC member must unanimously approve these minutes, this is intentional. “
While Jauvin underlines the unanimity behind these minutes, he does not stop predicting an immediate shift to QE. Instead, he points to a specific series of events that the FED seems to navigate.
The FED has already reduced the pace of the balance attack by half compared to its initial rate. Jauvin also notes that as the Reverse Repo facility (RRP) approaches zero and the FED reaches its target reserve level of about 3% of GDP, QT becomes more likely.
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In addition, the Treasury General Account (TGA) that may be rebuilt as soon as the debt ceiling has been resolved, which leads to a significant issue of account that could lead to interim disruptions in financing markets.
That is why Jauvin believes, instead of turning to QE, that the FED could pursue a temporary additional leverage (SLR) exemption, allowing commercial banks to absorb extra government debt. “They are very far from any formal QE. Instead, it is more likely that they pursue an SLR exemption, so that commercial banks can be the marginal buyer of debts, “predicts Jauvin.
A formal return to QE, concludes Jauvin, would only be spent if financial and economic circumstances will considerably deteriorate, including a large collapse of risk provisions and a decrease in rates to almost zero. In response to an X user who asks whether the termination of QT Bullish can be given an immediate move to QE, Jauvin offered a concise explanation:
“Therefore, think that it improves marginal for the current liquidity background because we will have the possible order of TGA recording in QT end in possible SLR exemption, and that will now be for now. QE should not even be in the current vocabulary of the discourse as it looks now. “
Renowned crypto analyst Pentoshi agreedEmphasizing a previously published prediction: “QT is coming to an end … My gamble, QT ends by the start of Q3. With everything that is currently taking place, Trump will probably eventually force it. Was correct on QT Guess in November 21. Let’s look. ‘
He quoted how the conclusion of quantitative relaxation coincided at the end of 2021 with the end of the Crypto Bull Run. Now market guards take up sharply whether the reverse – a potential termination of QT – can be renewed momentum for Bitcoin and other digital assets.
At the time of the press, BTC traded at $ 97,208.
Featured image made with dall.e, graph of tradingview.com