{"id":10003,"date":"2025-03-20T14:55:55","date_gmt":"2025-03-20T13:55:55","guid":{"rendered":"https:\/\/wsj-crypto.com\/?p=10003"},"modified":"2025-03-20T14:55:55","modified_gmt":"2025-03-20T13:55:55","slug":"the-feds-shift-unstoppable-momentum-for-bitcoins-bull-run","status":"publish","type":"post","link":"https:\/\/wsj-crypto.com\/index.php\/2025\/03\/20\/the-feds-shift-unstoppable-momentum-for-bitcoins-bull-run\/","title":{"rendered":"The Fed’s Shift: Unstoppable Momentum for Bitcoin’s Bull Run"},"content":{"rendered":"

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On Wednesday, the US Federal Reserve opted to maintain its benchmark interest rate within the 4.25%\u20134.5% range \u2013 prompting an immediate reaction from Bitcoin. The pause, while largely expected, arrived with a slightly altered forecast that involves a delayed timetable for forthcoming rate reductions and a significant alteration in the central bank\u2019s balance sheet tapering speed.<\/p>\n

Per the Federal Open Market Committee (FOMC) announcement, the Fed\u2019s \u201cDot Plot\u201d now reveals just two 25 basis-point rate reductions for the current year\u2014fewer than what numerous market participants had predicted in December. Decision-makers emphasized that even though interest rates remain in restrictive range, the actual timing of reductions relies on the trajectory of economic indicators, especially inflation and employment.<\/p>\n

Nevertheless, the latest announcement no longer claims that inflation<\/a> and employment are \u201cin equilibrium,\u201d reflecting the Committee\u2019s rising apprehension regarding economic unpredictability. However, perhaps the most pivotal shift was the Fed\u2019s declaration that it will decelerate the liquidation of its bond assets, commonly referred to as \u201cquantitative tightening<\/a>\u201d (QT).<\/p>\n

Further Reading<\/span><\/h2>\n<\/p>\n

Commencing in April, the monthly runoff for government bonds will decrease from $25 billion to $5 billion\u2014a considerable reduction that numerous analysts view as a precursor to a more accommodative policy if economic or market circumstances decline.<\/p>\n

Implications for Bitcoin<\/h2>\n

Shortly after the Fed\u2019s statement, Bitcoin surged approximately 4\u20135%, temporarily exceeding the USD 86,000 mark. Nik Bhatia\u2014founder of The Bitcoin Layer and author of Bitcoin Age\u2014utilized his latest video update<\/a> to analyze the ramifications of the decision. \u201cBitcoin up 4% on the news that the Fed slows QT and is still devoted to reducing interest rates,\u201d Bhatia remarked at the beginning of his assessment, highlighting that the market had been keenly focused on whether the central bank would adjust its quantitative tightening strategy.<\/p>\n

Bhatia elaborated on how the decrease of the monthly runoff ceiling from $25 billion to $5 billion can ease liquidity restrictions in the overall system: \u201cNow the Fed is still contracting its balance sheet, but it will now do so at only five billion a month instead of 25 billion a month, and that is a significant shift,\u201d he elaborated.<\/p>\n

Further Reading<\/span><\/h2>\n<\/p>\n

\u201cThis isn\u2019t a scenario where we\u2019re on the verge of QE simply because we reduced from 25 to five, but the initial step is to halt the balance sheet from decreasing \u2026 so that if the Fed needs to pivot, it can swiftly transition from 5 billion in QT a month to some moderate expansion.\u201d<\/p>\n

Bhatia pointed out that such an action can enhance market risk appetite: \u201cThe market perceives the Fed for what it is: it facilitates credit growth which expands balance sheets globally, and that inflow ultimately impacts asset prices \u2026 some of those assets may include stocks, Bitcoin\u2014[and] other financial instruments.\u201d<\/p>\n

Other professionals are even more extreme in their evaluations. BitMEX co-founder Arthur Hayes declared<\/a> via X: \u201cJAYPOW delivered, QT essentially ends on Apr 1. The next factor we need to get genuinely bullish about is either SLR exemption and\/or a resumption of QE. Was BTC $77k the bottom? Probably. But equity markets likely have more challenges ahead before fully aligning Jay with team Trump, so remain agile and prepared.\u201d<\/p>\n

Jamie Coutts, Chief Crypto Analyst at Realvision, largely concurs<\/a>: \u201cAfter last night, QT is effectively over (for a while). Treasury volatility has significantly reduced and is now reflecting the decline in DXY<\/a> from earlier this month. All of this is exceptionally liquidity-friendly.\u201d<\/p>\n

At the time of reporting, Bitcoin was trading at $85,881.<\/p>\n

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Bitcoin reclaims the 200-day EMA, 1-day chart | Source: BTCUSDT on TradingView.com<\/a><\/figcaption><\/figure>\n

Featured image created with DALL.E, chart sourced from TradingView.com<\/p>\n<\/div>\n


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