The Fed will reduce liquidity. How will this affect the crypto market?

The US Federal Reserve decided to cut reserves by $9 trillion. This means that they reduce the amount of liquidity in the economy. This tactic is called Quantitative Tightening (QT).

The step is quite important, because before that, for several years in a row, the United States pursued a policy of quantitative easing (Quantitative Easing, QT). In simple terms, they printed money and inflated inflation, for which the Fed was often criticized by politicians.
Balance reduction rate

The Fed plans to reduce liquidity by $47.5 billion monthly over the next 3 months. By September, this amount will reach $95 billion, and by the end of 2023, federal reserves should decrease to $7.6 trillion.

Predictions and consequences

Finance and cryptocurrency experts are trying to predict how new tactics will affect the markets. As usual, opinions were divided.

Well-known analyst CryptoWhale gives pessimistic forecasts. Historically, bitcoin has never been in a bull market when the U.S. did QT tightening. Therefore, in his opinion, “catastrophe is inevitable.”

The Economiser analyst does not share this panic. He drew attention to an important nuance: wages are rising in the United States. And against the backdrop of lower inflation, people will receive a higher real income. According to experts, “The cryptocurrency market will ultimately benefit from Quantitative Tightening:

The legendary Pompliano refused to predict. But he recalled that bitcoin never changed its monetary policy: neither during COVID, nor during the crisis, nor during the Ukrainian-Russian war. Therefore, it is the most predictable financial system in the world.

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