Bitcoin (BTC) may be on the brink of a trend reversal, as the prominent prediction market platform, Polymarket, anticipates that the US Federal Reserve (Fed) will conclude its quantitative tightening (QT) by April 30. A shift away from restrictive monetary policy could significantly benefit risk-sensitive assets like BTC.
Fed Expected To Conclude QT Before May
Bitcoin has experienced a nearly 13% decline in the past month, impacted by various factors such as US President Donald Trump’s trade tariffs and the Fed’s tight monetary policy.
In the last two months, the leading digital asset has plummeted from its all-time high (ATH) of $109,588 on January 19 to the low $80,000 range at the time this article was written, erasing over $400 billion from its market capitalization.
Nonetheless, the fortunes for the flagship cryptocurrency may soon shift. Polymarket now forecasts a 100% likelihood that the Fed will cease its restrictive monetary policy – QT – before May. This transition is expected to favor risk-sensitive assets, including cryptocurrencies.
For those unfamiliar, QT is a monetary strategy where the central bank decreases its balance sheet by selling government bonds or allowing them to mature without reinvestment, effectively removing liquidity from the economy. For Bitcoin, this often results in lower prices, as decreased liquidity means less cash available for high-risk assets like crypto.
QT serves as one of the primary monetary tools the Fed employs to regulate liquidity in the economy. The other main tool is raising short-term interest rates, which discourages borrowing and investment in volatile assets, usually leading to price corrections in both stocks and cryptocurrencies.
The Fed initiated its current QT phase in June 2022, aiming to tighten market liquidity and counter rising inflation, a consequence of pandemic-era stimulus measures. The February Consumer Price Index (CPI) report indicates that inflation has eased to 2.8%, approaching the Fed’s long-term inflation target of 2%, suggesting that QT may have effectively met its goals.
Could Q2 2025 Be Bullish For Bitcoin?
Should Polymarket’s forecasts hold true and the Fed ends QT before May, Q2 2025 may be bullish for Bitcoin and other cryptocurrencies. Benjamin Cowen, CEO of Into The Cryptoverse, shared this outlook, recently stating that ending QT would likely spark a market rally.
Recent positive commentary regarding Bitcoin from Fed Chair Jerome Powell has further fueled optimism about the cryptocurrency’s recovery potential. However, fears remain regarding Bitcoin’s ongoing status as a speculative asset instead of a stable store of value.
Nonetheless, institutional confidence remains robust. Asset management firm ARK Invest recently allocated another $80 million into BTC, reinforcing belief in the digital asset’s long-term potential. As of this writing, BTC is trading at $83,707, reflecting a 1.2% increase over the past 24 hours.
Featured Image from Unsplash.com, charts from Polymarket and TradingView.com
Editorial Process at Bitcoinist is focused on providing meticulously researched, accurate, and impartial content. We maintain rigorous sourcing standards, and each page undergoes careful review by our team of leading technology experts and experienced editors. This approach ensures the integrity, relevance, and value of our content for our audience.
