Stabilize

Reserve

Trillion

In a major shift in U.S monetary policy, the <a href="https://www.coingabbar.com/en/crypto-currency-news/trump-replace-powell-decision-may-shape-crypto-market" rel="noopener noreferrer nofollow">federal reserve</a> has officially ended its three year quantitative tightening (QT) program, marking one of the most significant pivots since the post pandemic economic recovery. The move signals a transition from balance sheet reduction to liquidity stabilization as the central bank seeks to maintain healthy banking system&nbsp;and guide inflation back towards target levels.
<img alt="fed end qt" src="https://d3iuzwoiyg9qa8.cloudfront.net/webadmin/storage/public/commonEditerImage/F6efcoJzajmz3q0cF5RlPDKkCFoQM9JP9Yr06Upr.jpg" width="300" title="fed end qt">
Source: <a href="https://x.com/bitinning/status/1995695515816673522" rel="noopener noreferrer nofollow">X</a>
<h3 id="span-span-strong-fed-halts-balance-sheet-reduction-after-shrinking-2-2-trillion-strong-span-span">Fed halts balance sheet reduction after shrinking $2.2 Trillion</h3>
The federal reserve has stopped cutting its balance sheet, ending a QT cycle that ran from 2022 to 2024. During this period, the fed allowed assets to roll off without reinvestment reducing:
<ul>
 <li>$1.6 trillion in U.S treasuries</li>
 <li>$600 billion in mortgage backed securities (MBS)</li>
</ul>
This marks one of the largest balance sheet contractions in its&nbsp;history and reflects the central banks attempt to reverse the excessive<a href="https://www.coingabbar.com/en/crypto-currency-news/powell-speech-summary-fed-liquidity-crypto-market-reaction" rel="noopener noreferrer nofollow"> liquidity</a> created during covid era stimulus.
<h4>Bank Reserves return to safe and stable levels</h4>
With QT ending, the Fed signaled the bank reserves have reached a comfortable and safe level reducing the risk of stress in short term funding assets. This is critical because excessively low reserves can trigger tightening in the repo market– a flashpoint&nbsp;to avoid after the volatile 2019 trading volume&nbsp;squeeze.
<h4>Market Expect a December rate cut as odds hit 88%</h4>
Following the policy shift, traders now see an 88% probability of a 25 bps rate cut in December. The market confidence has strengthened due to:
<ul>
 <li>Easing inflation pressures</li>
 <li>Steady labor market cooling</li>
 <li>The Fed pivoting away from aggressive tightening</li>
</ul>
A rate cut would mark the first step towards a more accommodative environment that could support risk assets, lending activity and broader market funding conditions.
<h4>Crypto Market Reacts as Fed Sparks New Liquidity Wave</h4>
The Federal Reserve’s decision to end its three-year QT cycle and shift toward liquidity support is being viewed as a bullish catalyst across the crypto assets. Traders expect improved dollar funding, higher risk appetite, and a potential December rate cut—all factors that typically boost digital assets.
With bank reserves stabilizing and&nbsp;preparing to add liquidity through T-bill purchases, Bitcoin and altcoins often benefit from easier financial conditions, stronger capital flows, and renewed market momentum.
If its&nbsp;pivot develops into a broader easing cycle, analysts anticipate increased inflows into crypto, stronger demand for risk assets, and a more favorable macro backdrop heading into the next&nbsp;phase.
<h4>Fed to boost liquidity through T-Bill purchases</h4>
Instead of shrinking its balance sheet further, the <a href="https://www.coingabbar.com/en/crypto-currency-news/fed-emergency-rate-cut-odds-drop-liquidity-injection-crypto" rel="noopener noreferrer nofollow">Federal Reserve</a> will shift to purchasing treasury bills (T-bills) to keep reserves from failing. This approach allows the Fed to:
<ul>
 <li>Stabilize the level of reserves in the banking system</li>
 <li>Maintain flexibility in its balance sheet composition</li>
 <li>Prevent tightening from resurging unintentionally</li>
</ul>
This move is widely seen as a strategic transition to a steady state balance sheet policy
<h4>Conclusion</h4>
The Fed’s decision to end its three year Quantitative tightening program is a major turning point in U.S monetary strategy. With bank reserves now stable,
Expectations for a December rate cut elevated, and the central bank shifting to T-bill purchases to maintain liquidity, markets are preparing for a more supportive policy environment.
The upcoming&nbsp;Decision will reveal whether this pivot evolves into a full easing cycle, shaping the economic landscape in the months ahead.

Fed end QT: Federal Reserve ends tightening program

Table of Contents

Coingabbar

Other articles published on Dec 2, 2025

Join our free newsletter for daily crypto updates!