Global markets recently experienced a significant uplift, with both U.S. equities and the cryptocurrency sector staging a robust rebound. This surge followed the U.S. Federal Reserve’s official conclusion of its Quantitative Tightening (QT) policy, coupled with prevailing market expectations of an imminent rate cut announcement next week. Bitcoin (BTC) impressively surged back to the $91,000 mark, while Ethereum (ETH) reclaimed the $3,000 level. BTC’s renewed attempt to breach and sustain above $91,000 is particularly noteworthy, as this price point is widely considered a critical “bull-bear dividing line,” making its defense paramount for the future trajectory of the market.
The cessation of the Fed’s QT program is undoubtedly a welcome development for risk assets. It signals an end to the regular withdrawal of market liquidity, temporarily alleviating investor concerns about potential liquidity crunches within the U.S. economy. This move, in isolation, provides a more stable environment for capital flow and investment, fostering a sense of relief across financial markets.
However, it is crucial for investors to distinguish between the end of QT and the initiation of Quantitative Easing (QE). A common misconception currently circulating is that the Federal Reserve has begun actively injecting liquidity into the market. This is not the case; there is no immediate schedule for QE. Therefore, the recent market euphoria might, in part, stem from a misinterpretation of the Fed’s actions. Should the upcoming Fed meeting next week deliver an unexpected decision—such as no rate cut, or the release of a hawkish 2026 dot plot or other restrictive signals—the positive impact of ending QT could swiftly be negated, potentially triggering a sharp market reversal and challenging BTC’s hold on the pivotal $91,000 level.
Adding another layer of complexity is the potential for further action from the Bank of Japan (BOJ). Following its recent rate hike, which notably sent ripples through global markets earlier this week, another BOJ rate increase next week could severely dampen the positive effects of the Fed ending QT. A Japanese rate hike effectively draws global liquidity, including from the U.S., potentially offsetting any domestic relief provided by the Fed. Unless the Federal Reserve explicitly hints at a short-term pivot towards QE, the threat of this external liquidity drain remains a significant concern for market stability. Thus, the sustainability of the recent rally—and whether it was merely a fleeting moment of exuberance—will largely hinge on the critical interest rate policy decisions from both the Federal Reserve and the Bank of Japan in the coming week.
Disclaimer: This article is for market information purposes only. All content and views are for reference only and do not constitute investment advice, nor do they represent the views and positions of Blockcast. Investors should make their own decisions and trades. The author and Blockcast will not bear any responsibility for direct or indirect losses incurred by investors’ transactions.
