If we mirror the current setup to the 2019 QE playbook, altcoins could face significant selling pressure in the near term.
From last night’s Fed statement, the central bank confirmed it will halt balance sheet reduction (QT) on December 1st. While the market initially interpreted this as a risk-on signal for high-beta assets like altcoins, the implication may be less straightforward.
Ending QT is not the same as starting QE. It simply means the pace of liquidity withdrawal will stop, but it doesn’t imply new liquidity is being injected. Without active balance sheet expansion, the overall liquidity environment remains tight compared to a true QE phase.
Historically, when the Fed ended QT in 2019, the altcoin market dropped by roughly 42%, even as the S&P 500 rallied strongly. The real “altcoin season” only began after the Fed launched full-scale QE in March 2020, when balance sheet expansion accelerated and risk assets across the board surged.
Given that backdrop, halting QT alone is unlikely to trigger a broad altcoin rally. For altcoins to meaningfully outperform, one of the following would need to occur:
1. The Fed initiates a new QE cycle, which appears highly unlikely in the near term.
2. The U.S. Treasury releases liquidity via TGA (Treasury General Account) distributions, which is also improbable as long as the government shutdown persists.
My base case: From now until year-end, we expect continued pressure on the crypto market, with liquidity likely rotating toward equities instead.
From last night’s Fed statement, the central bank confirmed it will halt balance sheet reduction (QT) on December 1st. While the market initially interpreted this as a risk-on signal for high-beta assets like altcoins, the implication may be less straightforward.
Ending QT is not the same as starting QE. It simply means the pace of liquidity withdrawal will stop, but it doesn’t imply new liquidity is being injected. Without active balance sheet expansion, the overall liquidity environment remains tight compared to a true QE phase.
Historically, when the Fed ended QT in 2019, the altcoin market dropped by roughly 42%, even as the S&P 500 rallied strongly. The real “altcoin season” only began after the Fed launched full-scale QE in March 2020, when balance sheet expansion accelerated and risk assets across the board surged.
Given that backdrop, halting QT alone is unlikely to trigger a broad altcoin rally. For altcoins to meaningfully outperform, one of the following would need to occur:
1. The Fed initiates a new QE cycle, which appears highly unlikely in the near term.
2. The U.S. Treasury releases liquidity via TGA (Treasury General Account) distributions, which is also improbable as long as the government shutdown persists.
My base case: From now until year-end, we expect continued pressure on the crypto market, with liquidity likely rotating toward equities instead.
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Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.