JPMorgan Says the Fed Could End QT Next Week: Here’s How This Could Affect Bitcoin

Bitcoin could receive a liquidity boost as JPMorgan expects the Federal Reserve to end Quantitative Tightening (QT) next week.

Notably, Bitcoin has struggled in recent weeks as global markets deal with economic uncertainty and renewed tariff tensions between the U.S. and China. 

JPMorgan Expects End to Quantitative Tightening 

After bouncing back from the sharp Oct. 10 crash that drove prices below $110,000, the token has faced steady resistance. It now trades at about $108,900, down 4.52% this month. However, new reports suggest that market conditions could soon move in Bitcoin’s favor.

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According to Bloomberg, JPMorgan strategists believe the U.S. Federal Reserve might end its ongoing quantitative tightening program as soon as next week during the October Federal Open Market Committee (FOMC) meeting. 

The bank said in a Wednesday note that tight funding conditions could push the Fed to stop reducing its balance sheet and begin temporary open market operations to ease short-term liquidity stress, especially around settlement dates and year-end funding pressure.

Interestingly, Reuters also reported three days back that several Wall Street analysts from Wrightson ICAP, Evercore ISI, and Jefferies also expect the Fed to end QT by the end of this month.

What is Quantitative Tightening?

For the uninitiated, quantitative tightening, or QT, is a monetary policy the Federal Reserve uses to drain excess liquidity from the economy. Notably, the central bank allows Treasury securities and mortgage-backed securities to mature without reinvesting the proceeds, which gradually reduces its balance sheet. 

This approach is the opposite of quantitative easing (QE), where the Fed buys assets to pump money into the system and encourage growth. QT typically pushes long-term interest rates higher, makes borrowing more expensive, and slows inflation by limiting funds available for lending and investment.

The Fed began the current QT in June 2022 to roll back the massive stimulus measures from the pandemic, which had expanded its balance sheet to almost $9 trillion. Inflation had surged to 8% that year, the highest since 1991, and the central bank wanted to cool the economy without shocking markets.

At the start, the Fed capped QT at $60 billion a month in Treasuries and $35 billion in mortgage-backed securities. However, by 2024, it cut the Treasury cap to $25 billion a month, and by March 2025, it dropped it further to $5 billion while keeping mortgage reductions steady at $35 billion. 

The program has already trimmed more than $2.2 trillion from the balance sheet, which now sits at about $6.6 trillion. Interestingly, Fed Chair Jerome Powell recently said the end of QT is “nearing” due to signs of liquidity strain in repo and money markets.

How Bitcoin Could React to the End of QT

If the Fed stops QT, it will pause the steady drain of liquidity from the financial system, leading to a looser policy stance. This would boost the amount of money available for investment, push Treasury yields lower, and increase investors’ appetite for risk. These are all conditions that usually favor Bitcoin.

Importantly, history supports this. During the Fed’s QE phase between 2020 and 2021, Bitcoin soared from roughly $7,000 to about $69,000.

Nonetheless, when QT began in 2022, the token slumped from $47,000 to $15,000 as liquidity tightened. Analysts now believe that an end to QT could spark fresh inflows into Bitcoin and potentially help the asset climb beyond multiple resistance levels.

For instance, market veteran Michaël van de Poppe pointed out that Bitcoin has moved sideways between $100,000 and $120,000 for nearly six months, suggesting a major breakout could be on the horizon. 

He expects that the upcoming FOMC meeting, possible rate cuts, and changes in monetary policy could trigger Bitcoin’s next big move. Van de Poppe also noted that Bitcoin at $110,000 today looks cheaper compared to when it traded at $69,000 in 2021, while rates were near zero. According to him, a move toward lower rates would likely drive a strong upward impulse.