Will the End of Quantitative Tightening Reverse the Crypto Down Trend?

Core Viewpoint - The Federal Reserve has halted its balance-sheet runoff and shifted its policy to stabilize liquidity in response to market pressures, particularly in the cryptocurrency sector [1][2][3][4]. Group 1: Federal Reserve Policy Changes - The Federal Reserve ended quantitative tightening on December 1, 2023, and will now reinvest maturing Treasuries and mortgage-bond payouts into Treasury bills to maintain ample reserves [1][3]. - A 25-basis-point rate cut was implemented, adjusting the target range to 3.75%-4.00%, marking the first cessation of balance sheet reduction since 2022 [4]. - Chair Jerome Powell indicated that the decision was made once reserves exceeded the level necessary for smooth market functioning, as indicated by money-market signals [3]. Group 2: Impact on Cryptocurrency Market - The shift in Fed policy aims to stabilize liquidity and control short-term rates, but the cryptocurrency market remains cautious amid ongoing downward momentum [2][5]. - Bitcoin's recent trading activity showed volatility, with prices fluctuating between approximately $83,951 and $90,108, indicating market uncertainty [4][5]. - Historical patterns suggest that Bitcoin dominance tends to peak shortly after the cessation of quantitative tightening, followed by a decline in dominance as altcoins begin to recover [6].