While Jerome Powell signaled the Federal Reserve may pause its balance sheet reduction, crypto markets show little optimism as BTC options remain tilted toward downside risk.
Federal Reserve Chair Jerome Powell suggested that the U.S. central bank’s long-running quantitative tightening (QT) program could be nearing its conclusion — yet Bitcoin (BTC) traders remain unconvinced. Despite signs that liquidity pressures may ease, BTC continues to trade flat, with derivatives markets signaling ongoing bearish sentiment.
Speaking at the National Association for Business Economics conference in Philadelphia, Powell said the Fed could soon “reach a point where balance sheet runoff will have to stop.” The quantitative tightening process, launched in 2022, has already reduced the Fed’s balance sheet from $9 trillion to $6.6 trillion as the central bank unwinds the liquidity injections made during the pandemic.
Powell emphasized that the Fed wants to maintain reserves “somewhat above the level consistent with ample conditions,” ensuring stability in short-term funding markets. He noted that policymakers are “closely monitoring a wide range of indicators” to decide when to halt QT, hinting that the decision may come within months.
However, the crypto market remains largely unmoved. As of Wednesday, Bitcoin traded near $112,600, little changed over 24 hours. On the Deribit options exchange, short-term puts continue to command a premium over calls, suggesting traders are still hedging against potential downside. Even options contracts extending into March 2026 reflect bearish pricing, highlighting skepticism toward a near-term rally.
Analysts note that ending QT does not automatically translate into fresh liquidity injections or a return to the quantitative easing (QE) seen during the 2020 bull market. Moreover, the pace of balance sheet reduction has already slowed since mid-2024, with the Fed limiting Treasury redemptions to $5 billion per month while maintaining a $35 billion cap on mortgage-backed securities.
“The big takeaway from Powell’s talk today was that QT is likely to end soon,” one BITX market observer commented. “But the run rate is already very small, so it’s not a huge change.”
While Powell’s remarks signal a potential end to balance sheet tightening, crypto investors appear cautious, focusing instead on broader macro uncertainty and sluggish market momentum. Until clear signs of renewed liquidity or rate easing emerge, Bitcoin’s bearish undertone may continue to define sentiment — even as the Fed’s tightening cycle nears its close.
Disclaimer
This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.