On Tuesday, February 19, the Federal Reserve published their meeting report, revealing that central bankers are considering an end – or at least a significant slowdown – for quantitative tightening (qt). The document declares: “Several participants suggest that stopping or slowing down the balance sheet while awaiting the resolution of the debt ceiling.”
These remarks have fueled optimism among Bitcoin experts who consider the potential end of QT as a bullish signal. Many consider it as a precursor to greater liquidity entering the financial markets, a condition that has historically benefited risk assets such as cryptocurrencies.
The recently published minutes confirm that some Fed officials are concerned about the interaction between the reduction of the current assessment and the debate on the ceiling of the imminent debt. The possibility of a large -scale American treasury emission once the ceiling of the debt resolved seems to be a key engine behind the calls to take a break or stop QT.
Related reading
No explicit passage to quantitative relaxation (QE) has been announced, but the recognition that the balance sheet could be reduced was sufficient to stir up speculation in digital active circles. Minutes must be approved unanimously by the Federal Open Market Committee (FOMC)Also suggesting an intentional message from political decision -makers.
Implications for Bitcoin
The renowned commentator and host of the Podcast on the Margin, Felix Jauvin, went to X to underline the importance of the Fed signaling, writing: “There, qt, qt ending this spring. Remember that each FOMC member must unanimously approve these minutes is intentional. »»
While Javin underlines the unanimity behind these minutes, he does not plan to predict an immediate change towards the QE. Instead, it points to a specific chain of events that the Fed seems to sail.
The Fed has already reduced half the pace of the balance sheet by half compared to its initial rate. JAUVIN also notes that, as the inverse repo installation (RRP) approaches zero and that the Fed reaches its target reserve level of around 3% of GDP, the end of QT becomes more likely.
Related reading
In addition, concerns are looming on the General Treasury Account (TGA) Potentially reconstructed once the ceiling of the debt has been resolved, leading to a major program of the bill which could lead to provisional disturbances on the financing markets.
Consequently, rather than pivoting QE, Javin thinks that the Fed could pursue a temporary exemption from additional leverage (SLR), allowing commercial banks to absorb additional public debt. “They are very very very very far from all kinds of formal Qe. Instead, it is more likely that they are pursuing an SLR exemption allowing commercial banks to be the marginal buyer of the debt ”, predicts Javin.
A formal return to QE, concludes JAUVIN, would only materialize if the financial and economic conditions deteriorate considerably, in particular a major collapse of risk assets and a drop in rates to zero. In response to an X user asking if the end of the QT is optimistic without necessarily indicating an immediate decision to Qe, Javin offered a brief explanation:
“Consequently, think about the current liquidity backdrop, it improves slightly in that we will have the possible sequence of TGA draw in QT ending with a potentially SLR exemption, and it will be for the moment. Qe should not even be in the current vocabulary of discourse as it is. »»
Renowned crypto analyst Pentoshi agreeHighlighting a forecast published previously: “QT has finished in its end … I suppose that QT ends at the beginning of Q3. With everything that happens, Trump will probably end up forcing him. Was correct on QT Guess on November 21. Let’s see.
He cited how the conclusion of quantitative relaxation at the end of 2021 coincided with the end of the crypto Bull Run. Now, market observers observe strongly if the reverse – a potential QT termination – could arouse renewed momentum for bitcoin and other digital assets.
At the time of the press, the BTC was negotiated at $ 97,208.
Star image created with dall.e, tradingView.com graphic