Market Trend & Prediction - Bitcoin price increased significantly from $16,000 to $126,000 during the period when the Federal Reserve (Fed) was reducing its balance sheet for 3 years [1] - The market anticipates potential changes and uncertainties now that the Fed is expanding its balance sheet to increase bank reserves [1] Monetary Policy - The Fed announced it would purchase $40 billion of Treasury Bills within the next 30 days [1] - The market expresses surprise at the Fed's decision to start buying Treasury Bills sooner than expected (before 2026) [1]

Core Viewpoint - The Federal Reserve plans to expand its balance sheet by purchasing short-term Treasury securities to alleviate pressure in overnight lending markets, which are essential for the overall financial system [1] Group 1 - The Federal Reserve is ready to buy short-term Treasury securities [1] - The aim of this action is to prevent pressure in overnight lending markets [1] - Overnight lending markets are critical to the broader financial system [1]

Liquidity & Monetary Policy - The US government reopening is expected to lead to increased liquidity due to TGA spending over several months [1] - Quantitative Tightening (QT) is expected to end in December, leading to a gradual increase in the balance sheet [1] - The market anticipates the dollar to weaken [1] - Expect "temporary" measures like Term Funding and SRF operations to avoid a year-end funding squeeze [1] - Changes to the Supplementary Leverage Ratio (SLR) are anticipated in Q1 to allow banks to absorb more issuance and re-lever their balance sheets, acting as a significant liquidity boost [2] - Lower rates are expected as banks buy more bonds due to SLR changes [2] Fiscal Policy & Global Economy - Expect stimulus payments and fiscal stimulus to boost the economy [2] - China is expected to continue balance sheet expansion, and Europe may implement fiscal stimulus or extra spending [2] - The government aims to stimulate the economy leading up to the Mid-Terms [3] Regulatory & Legislative - Finalization of the CLARITY Act for crypto is expected [2]

Group 1 - The Federal Reserve may soon end its balance sheet reduction program as it approaches a level of reserves deemed consistent with ample conditions [2][4] - The quantitative tightening (QT) initiated in 2022 has reduced the Fed's balance sheet from approximately $9 trillion to $6.6 trillion [3] - Powell emphasized the importance of maintaining bank reserves above a certain threshold to ensure financial stability and avoid disruptions in short-term funding markets [4] Group 2 - Markets are anticipating two 25-basis-point rate cuts by year-end, which has generated bullish sentiment in crypto social media [5] - Despite these developments, Bitcoin (BTC) remains unimpressed, trading near $112,600 with bearish sentiment reflected in options pricing [6][7] - The pace of QT has slowed since mid-2024, with limited monthly redemptions of Treasuries and a maintained cap for mortgage-backed securities, indicating that the end of QT may not lead to significant market changes [8]