Market expert VirtualBacon recently suggested that the most important event for the cryptocurrency industry this year is not the Bitcoin (BTC) halving or approval Exchange-traded funds (ETFs), it is a potential shift in the liquidity policy of the Federal Reserve (Fed).
After 18 months of tightening measures, the Fed is preparing to pause its quantitative tightening policy and perhaps begin implementing its covert QE program again.
What’s next for the cryptocurrency market?
Recently mail On social media platform In 2019, the Fed halted QT, sending altcoins soaring. On the contrary, in 2022, when the Fed started QT, altcoins peaked.
Now, as the Fed is expected to end the QT period in 2025, VirtualBacon expects a similar rally in altcoins. The relationship is clear: when the Fed increases liquidity, altcoins tend to rise. The pressing question now is when exactly the QT period will end.
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while Federal Reserve Bank This shift may not be explicitly classified as quantitative easing, and the expert suggests that the pivotal moment will arrive when they remove language about “shrinking the size of the balance sheet.”
The last notable example of this was during the 2019 repo crisis, when banks faced immediate cash shortages, prompting the Federal Reserve to pump $75 billion into the financial system. Although Powell claimed that it was “not QE,” it actually was, and after this intervention, the value of Bitcoin tripled in a matter of months.
CME FedWatch shows high probability of interest rate cuts
Major financial institutions have already begun making forecasts, with Goldman Sachs stating that the October meeting is the base case for ending the QT period, Bank of America expecting the QT period to end by the end of the month, and Evercore noting that the Fed is likely to signal the end of the QT period this week.
The same indicators that caused market turmoil in 2019 are pointing to distress now. Regardless of the official statements, it seems that QT is nearing its end Hidden quantitative easing On the horizon.
This shift would facilitate the return of liquidity to markets, which has historically driven up cryptocurrency prices. Liquidity fuels market movements, and the Fed is preparing to refill that tank.
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The CME FedWatch tool currently indicates a 96.7% chance of a rate cut this month and an 87.9% chance of another in December. Powell recently hinted that Operation QT will end “in the coming months,” signaling an imminent shift.
M2 money supply indicates the upcoming Bitcoin rally
Despite the current uncertainty in the market, VirtualBacon confirms this Bitcoin It has not reached its peak. Of the 30 historical indicators that typically point to the peak of a bull market, none have been activated yet, with data suggesting there is still room for growth.
Global Money supply M2 It continues to rise, historically causing Bitcoin prices to rise by 10 to 12 weeks. The expert added that since the beginning of the month, this money supply has been increasing.
This development indicates that Bitcoin’s next upward move is already underway, albeit lagging behind the liquidity curve. In addition, VirtualBacon predicts that once the Fed turns around, a new altcoin season may begin.
Featured image of DALL-E, chart from TradingView.com
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