Bitcoin Braces for $6.6 Trillion Fed Shift as Powell Signals End to Tightening

Bitcoin (BTC) and the broader crypto market are entering a pivotal week after Federal Reserve Chair Jerome Powell indicated that the central bank’s quantitative tightening (QT) program — a major liquidity drain since 2022 — may soon come to an end.

In remarks that immediately rippled through financial markets, Powell said the Fed is “fast approaching a point where we can slow and eventually stop balance-sheet reduction,” referring to the process that has shrunk the Fed’s holdings to roughly $6.6 trillion.

The hint of a policy reversal sent risk assets higher, with Bitcoin rebounding from $109,000 to trade near $114,200 within hours, as traders began to price in a potential liquidity flip that could fuel the next phase of the crypto bull cycle.

Powell Signals an End to QT

The Federal Reserve’s balance-sheet reduction began in mid-2022 as part of its campaign to tighten financial conditions and fight inflation. Since then, the Fed has reduced its holdings by over $1.5 trillion, draining liquidity from global markets.

However, with inflation easing and the U.S. economy showing signs of cooling, Powell hinted at a pivot in policy direction, saying the central bank doesn’t want to risk “excessive tightening” that could destabilize credit markets or economic growth.

“We are nearing the level of reserves that the system needs,” Powell said during a Washington D.C. appearance. “Once we reach that point, balance-sheet runoff will slow and eventually stop.”

Analysts interpret this as the Fed preparing to end QT earlier than expected, potentially restoring hundreds of billions of dollars in liquidity to the financial system — liquidity that has historically benefited Bitcoin and other risk assets.

$6.6 Trillion Turning Point for Global Liquidity

The Fed’s balance sheet remains massive by historical standards, but the market’s focus has shifted to the direction of flow rather than the size.

Ending QT means the Fed would stop draining reserves from the banking system, a move that could stabilize the U.S. Treasury market and lift global asset prices.

“Liquidity is the single biggest driver of Bitcoin,” said Arthur Hayes, former BitMEX CEO. “When the Fed stops tightening, it’s effectively opening the door for capital to move into risk assets — and crypto benefits first.”

If QT halts before year-end, Bitcoin could respond with an aggressive rally similar to early 2024, when the market surged on expectations of rate cuts and renewed liquidity.

Bitcoin Price Outlook: $120K in Sight?

Technically, Bitcoin remains in a strong uptrend, consolidating just below resistance between $114,000 and $116,000.
On-chain data shows long-term holders are still accumulating, while derivatives markets indicate a potential squeeze forming on short positions.

If buyers push BTC above $116,000, analysts expect a breakout toward $120,000–$125,000, aligning with the next Fibonacci extension and options open-interest clusters.

Conversely, if macro uncertainty triggers a sell-the-news reaction, BTC could revisit $108,000 support, which has acted as a key accumulation zone since late September.

Liquidity Is Everything

The broader implication of Powell’s remarks stretches beyond crypto.
Global liquidity cycles have closely tracked Bitcoin’s performance over the past decade — each period of Fed balance-sheet expansion has coincided with major BTC rallies, while contraction phases have typically preceded drawdowns.

According to MacroMicro, Bitcoin’s 2020–2021 bull run began roughly six months after the Fed ramped up quantitative easing during the pandemic, boosting its balance sheet by $4.5 trillion.

If the current $6.6 trillion QT slowdown evolves into renewed balance-sheet expansion in 2026, crypto markets could enter a multi-year liquidity supercycle, setting the stage for new all-time highs.

Market Reactions: Cautious Optimism

U.S. equities, gold, and Bitcoin all rose after Powell’s comments, while bond yields dipped slightly — signaling investor expectations for a softer monetary stance.

However, some analysts warned against premature celebration.
“Stopping QT isn’t the same as restarting QE,” said Mike McGlone of Bloomberg Intelligence. “Liquidity may stabilize, but it’s too early to assume an outright flood of new money into markets.”

Still, traders are betting that the end of tightening marks the start of the next risk-asset expansion phase — and Bitcoin stands to be one of its biggest beneficiaries.

Key Takeaways

• Fed’s QT program nearing its end, balance sheet now at $6.6 trillion.
• Powell signals liquidity stabilization, potentially bullish for Bitcoin.
• BTC trades near $114K, with $120K target on breakout.
• Global markets react with cautious optimism as tightening cycle fades.

Final Thoughts

The Federal Reserve’s shifting stance could prove pivotal for Bitcoin’s next major move.
With liquidity cycles driving crypto’s long-term price trajectory, Powell’s signal of a $6.6 trillion Fed flip may represent the moment when the macro tide turns back in Bitcoin’s favor.

Whether this becomes the spark for the next leg of the bull market — or just a pause before renewed volatility — will depend on how the Fed manages the final stretch of its tightening campaign.