The Federal Reserve officially ended its Quantitative Tightening program on December 1, 2025, freezing its balance sheet at $6.57 trillion and marking a pivotal shift in monetary policy that could reshape Bitcoin (CRYPTO: BTC) and cryptocurrency markets.

After draining $2.39 trillion from the financial system since June 2022, the Fed halted Treasury security runoff while continuing to reduce mortgage-backed securities at $35 billion monthly. The decision arrives as bank reserves hover around $2.89 trillion, approaching critical thresholds that threatened market stability.

What This Means For Crypto Markets

The three-year QT program represented the largest liquidity withdrawal in central banking history, putting sustained pressure on risk assets. Bitcoin currently trades around $86,600 as of December 2, down roughly 30% from its October peak. Exchange data shows nearly $1 billion in leveraged crypto positions were liquidated during Monday’s selloff, illustrating how thin liquidity amplifies volatility in highly sensitive digital asset markets.

Historical Parallels To 2019

Market analysts are drawing comparisons to August 2019, when the Fed last ended quantitative tightening. That pivot coincided with a major bottom in altcoins and preceded Bitcoin’s rally from approximately $3,800 to $29,000 over 18 months.

However, Bitcoin declined roughly 35% in the months immediately following the 2019 QT halt before explosive gains materialized during early 2020. Benjamin Cowen, a prominent crypto analyst, emphasized that settlement lags could postpone observable balance sheet expansion until early 2026.

Key Differences This Time

The current environment differs from 2019. Interest rates have been cut to the 3.75% to 4.00% range, providing more accommodative conditions. The Overnight Reverse Repo facility has dropped to near zero from $2.5 trillion, removing a key liquidity buffer that once cushioned markets.

Institutional adoption has accelerated dramatically. Spot Bitcoin ETFs have accumulated over $50 billion in assets, creating sustained demand channels that didn’t exist previously. Companies like BlackRock and Fidelity continue expanding crypto exposure through regulated vehicles.

Altcoin Season Potential

Analyst Matthew Hyland identifies historical trends where non-QT periods were followed by sustained altcoin rallies lasting 29 to 42 months. The OTHERS.D/BTC.D ratio currently trades at 0.36 with room for consolidation before altcoins typically regain momentum. If patterns hold, 2026 could mark the beginning of a multi-year altcoin outperformance phase.

Market Outlook

Investment firm BTIG argues that the 36% pullback has pushed Bitcoin into an oversold phase, potentially setting up for recovery. Technical analysts identify $86,000 as pivotal support, while resistance sits in the $93,000 to $97,000 range.

The consensus holds that liquidity, rather than Bitcoin halvings or narrative hype, has historically driven crypto cycles. With global M2 money supply rising and the Fed’s balance sheet stabilizing after three years of contraction, conditions appear increasingly favorable for risk assets.

However, investors should prepare for near-term choppiness. Just as 2019 saw initial weakness before rallies materialized, the full impact may take months to manifest. Key signals to monitor include inflation trends, employment data, and any shifts in Fed rhetoric around future easing.

The end of quantitative tightening removes a significant headwind that has constrained digital asset markets for three years. Whether Bitcoin and altcoins can capitalize on improving liquidity will depend on how quickly confidence rebuilds among institutional and retail investors.

Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.