The era of "quantitative tightening" on the Federal Reserve’s balance sheet officially ended on December 1, 2025, with its size locked at approximately $6.5 trillion. As the December 10–11 FOMC meeting approaches, market attention has shifted from a simple focus on rate cuts to deeper adjustments in balance sheet operations.
Mark Cabana, former head of the New York Fed’s repo market, predicts the Fed is highly likely to announce a plan to purchase $45 billion in Treasury securities per month following this meeting. Known in the market as "reserve management purchases," this program, once implemented, is expected to have far-reaching effects on global risk assets—including cryptocurrencies.
01 Policy Turning Point
On December 1, 2025, the Federal Reserve officially ended the quantitative tightening policy it began in 2022. This policy had reduced the Fed’s balance sheet from a peak of $9 trillion to $7.4 trillion.
The end of quantitative tightening was not unexpected. As early as the October 28–29, 2025 FOMC meeting, the Fed had already decided to fully halt reinvestment of maturing Treasuries starting December 1.
The level of reserves within the banking system is shifting from "ample" to "sufficient," with the risk of moving further toward "scarcity."
02 Market Signals
Short-term financial markets have already issued several warning signs. The repo market, which serves as the hub for short-term funding in the financial system, has seen its overnight reference rates—such as SOFR and TGCR—frequently and sharply breach the upper end of the Fed’s policy rate corridor in recent months.
The federal funds rate has moved higher within its target range, and usage of the standing repo facility has hit record highs. The overnight reverse repo balance has dropped to a post-pandemic low of $5.9 billion. Without timely intervention, reserve levels could fall further toward the lower bound of "sufficient reserves."
A former New York Fed expert stated in an interview that these market signals indicate "liquidity problems have become so severe" that, without intervention, short-term rates could spiral out of control, risking a repeat of the 2019 "repo crisis."
03 Bond Purchase Plan
Mark Cabana forecasts that the Fed may announce monthly purchases of $45 billion in short-term Treasuries. This amount is slightly above other institutional forecasts; Evercore ISI analysts expect monthly purchases of $35 billion in short-term Treasuries.
This potential policy shift marks a transition in the Fed’s liquidity management strategy from "draining" to "injecting" liquidity.
Cabana emphasizes that this move is not a full return to QE, but rather a targeted response to alleviate the recent shortage of bank reserves and the surge in repo rates above 5.5%. This approach is fundamentally different from traditional QE, which aims to stimulate economic growth by purchasing large amounts of long-term bonds to suppress yields.
04 Crypto Market Response
In anticipation of the Fed’s policy shift, the crypto market has seen a technical rebound. According to Gate Plaza’s latest update on December 8, Bitcoin is currently trading around $92,000, while Ethereum is above $3,100.
However, the market has shown caution ahead of the FOMC meeting, with Bitcoin briefly dipping below $90,000. This reflects investors’ wait-and-see attitude before major policy announcements.
Market analysts believe that after the Fed ends QT, it may quickly inject liquidity into the economy by purchasing short-term Treasuries. This move is expected to restore market liquidity and boost demand for risk assets.
05 Policy Distinctions
The market commonly refers to this potential bond purchase plan as "stealth QE," but Fed officials stress that it is fundamentally different from quantitative easing.
The core difference lies in the purpose and choice of tools. QE’s main goal is to lower long-term rates and stimulate economic growth by buying long-term Treasuries and MBS. Reserve management purchases, on the other hand, serve a more technical purpose—ensuring there is enough liquidity in the "pipes" of the financial system.
New York Fed President John Williams has made it clear: "Such reserve management purchases will be the natural next phase of the FOMC’s ample reserves strategy and do not represent a change in the underlying stance of monetary policy."
06 Potential Impact on Crypto Assets
The restoration of liquidity could increase demand for risk assets, including cryptocurrencies. This aligns with analyses of the Fed’s end to QT, which suggest a boost in overall risk appetite. Credit bonds, high-yield assets, emerging market assets, and even cryptocurrencies could benefit from looser financial conditions.
If Cabana’s forecast proves correct, monthly bond purchases of $45 billion would signal a renewed expansion of the Fed’s balance sheet. Analysts believe this would be positive for equities, especially tech and growth stocks, as well as crypto assets, with the Nasdaq potentially seeing an additional 3%–5% gain.
Gate’s educational articles also note that ending QT will prevent further liquidity drainage, helping to stabilize the banking system, short-term market rates, and credit conditions.
The market broadly expects the Fed to cut rates by 25 basis points at the December meeting. If this rate cut coincides with the $45 billion bond purchase plan, risk assets could see a broad rally.
According to market analysis, in this scenario equities could rise by 5%–8%, risk assets across the board would rally, and the yield curve would steepen, with long-term bonds surging.
Halting QT and the potential new bond purchase plan have created fresh liquidity expectations for the crypto market. While this does not signal a full return to easy monetary policy, it is crucial for investors to understand how this policy shift will affect market liquidity and risk appetite.
As the Fed meeting approaches, markets are watching closely to see how Chair Powell balances the dual challenges of liquidity management and inflation control.
