Related Reading: Bitcoin Bull Run Isn’t Over: Cathie Wood Predicts $1.5 Million "This isn’t some, Hey, we’re on the cusp of QE now just cause we went from 25 to a five,’ but the first step is to get the balance sheet to stop shrinking … so that if the Fed needs to pivot, it can go quickly from 5 billion in QT a month to some modest expansion.” Bhatia underscored that such a move can fuel market risk appetite: "The market sees the Fed for what it is: it supports credit creation which expands balance sheets across the world, and that flow ends up in asset prices … some of those assets can be stocks, Bitcoin—[and] other financial assets.” Other experts are even more drastic in their assessment.
"Bitcoin up 4% on the news that the Fed slows QT and is still committed to cutting interest rates,” Bhatia said at the start of his analysis, noting that the market had been laser-focused on whether the central bank would modify its quantitative tightening approach.
Bhatia explained how the reduction of the monthly runoff cap from $25 billion to $5 billion can loosen liquidity constraints in the overall system: "Now the Fed is also still contracting its balance sheet, but now it will do so by only five billion a month as opposed to 25 billion a month, and that is a material change,” he said.
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