The Fed ends tapering, Bitcoin faces a critical turning point: bull run target of $200,000

The Fed has decided to end its Quantitative Tightening (QT) program, putting Bitcoin at a critical liquidity inflection point. Analysts believe that although fluctuations may occur in the short term, the crypto market is unlikely to repeat the sluggish scenario after the Fed's policy shift in 2019 due to key differences such as higher interest rates and strong institutional demand. Experts predict that favorable macro and geopolitical outlooks could push Bitcoin to break through the current trading range and reach a target price of $200,000 by the third quarter of 2026.

QT Ends: A Key Turning Point for Crypto Market Liquidity

Fed Chairman Jerome Powell's remarks on Tuesday suggested that the central bank's balance sheet reduction (i.e., quantitative tightening) is about to end, which is typically seen as a major positive for risk assets like Bitcoin.

• QT's positive impact on risk assets: The end of quantitative tightening means that market liquidity will improve, and historically, this transition often paves the way for capital inflows into high-yield investments.
• Initial Fluctuation of the Double-Edged Sword: Delta Exchange research analyst Riya Sehgal pointed out that despite the Fed cutting interest rates by 25 basis points, traders' expectations for further easing are diminishing. ETF fund flows also confirm this cautious sentiment, with Bitcoin funds seeing an outflow of 197.5 million dollars and Ethereum funds seeing an outflow of 66.2 million dollars.
• Different from 2019: Bitget's chief analyst Ryan Lee believes that although the current context shares similarities with 2019 (such as the Sino-US trade war and political pressure), Bitcoin is currently at the center of global liquidity flow, and today's institutional crypto landscape may amplify the upside potential rather than trigger pressure.

Macro Landscape Differences: High Interest Rates and Political Intervention Boost BTC

Analysts emphasize that the current macroeconomic environment is significantly different from 2019, and these differences are more favorable for the long-term rise of Bitcoin.

• Potential Energy of Interest Rate Accumulation: Sean Dawson, the research director of the on-chain options trading platform Derive, emphasized that the current interest rate is about 4%, significantly higher than 2.5% in 2019. He believes that the higher the interest rate, the more “energy” accumulates in the market, and once the interest rate drops, this capital will flow into risk assets like Bitcoin.
• Prospects for Loose Policy: Analysts added that the upcoming changes in the leadership of the Fed chosen by Trump could accelerate interest rate cuts, thereby creating a “fiscally loose Fed”, which will be extremely beneficial for Bitcoin holders.

Price Outlook: Short-term Fluctuation and Long-term $200,000 Target

Despite the long-term bullish outlook, analysts remain cautious about short-term price fluctuations.

• Short-term correction risk: Ryan Lee acknowledges that the tensions in Sino-U.S. trade and political pressures may lead to short-term fluctuations, and Bitcoin may face a correction of 10% to 15%.
• Long-term Bullish Support: However, experts agree that the long-term outlook is bullish under the new regulatory reality and macroeconomic reality. Sean Dawson believes that the current government “fully supports the adoption of cryptocurrency”, combined with the anticipated interest rate cuts, is extremely favorable for Bitcoin.
• Breakthrough Trading Range: Analysts believe that the Fed's loose policy is the key factor needed for Bitcoin to break through the $105,000 to $115,000 trading range. He predicts that based on favorable macro and geopolitical developments, the target price for Bitcoin is $200,000, expected to be achieved in the third quarter of 2026.

What is the impact of the Fed ending the balance sheet reduction?

The Fed's decision to end quantitative tightening (QT, i.e., balance sheet reduction) is a significant shift in monetary policy, and this decision has had various impacts on global financial markets and the economy.

Increase market liquidity

• Bond Market: The end of QT means that the Fed stops passively selling or not rolling over its holdings of U.S. Treasuries and mortgage-backed securities (MBS) upon maturity. This reduces supply pressure on bonds in the market, stabilizes bond prices, and lowers long-term Intrerest Rate.
• Bank Reserves: The Fed has stopped reducing its balance sheet, resulting in the commercial banks' reserve balances at the Fed ceasing to decline. This provides banks with more Liquidity and enhances their lending capacity.

Impact on the economy and financial markets

• Stock Market Support: Increased market liquidity often flows into risk assets. The stock market may therefore gain support or upward momentum, and investor sentiment tends to become optimistic.
• Weakening Dollar: An increase in market liquidity, coupled with the possibility of a decline in interest rate expectations, typically leads to a weakening of the dollar relative to other currencies.
• Inflation Pressure: If market Liquidity increases too quickly, it may increase long-term inflation pressure.
• Decline in borrowing costs: As bond yields decrease, the borrowing costs for businesses and individuals will also lower, stimulating investment and consumption.

Impact on the crypto market

• Positive for Crypto Assets: The cryptocurrency market typically views increased global liquidity as good news. In an environment with ample liquidity, investors are more likely to allocate funds to higher-risk crypto assets, driving up the prices of mainstream coins like Bitcoin and Ethereum.

Policy Signal Shift

• Signs of Economic Slowdown: The end of QT is often interpreted by the market as a signal that the Fed believes economic growth is slowing down or that the financial system is under certain pressures and requires policy support.
• Interest Rate Cut Expectations: The cessation of QT is often a precursor to the Fed's shift towards a loose monetary policy cycle (potentially accompanied by future interest rate cuts), and the market may reflect interest rate cut expectations in advance.

The main impact of the Fed ending quantitative tightening is to increase global market liquidity, reduce borrowing costs, support the stock market and the crypto market, and possibly lead to a weakening of the dollar. This policy shift marks a change in the Fed's monetary stance from tightening to neutral or even easing, which has important guiding significance for the future direction of the economy.

Market expectations for the end of QT have been partially digested. After the announcement, the stock market initially reacted calmly, followed by fluctuations due to Powell's cautious remarks on the future interest rate path. The yield on 10-year Treasury bonds rose slightly, and the dollar strengthened, indicating that the market is weighing the impact of increased liquidity against the uncertainty of interest rate cuts. Some analysts believe that in the long run, the effects of ending the balance sheet reduction may be more important than the interest rate path itself.

Conclusion

The Fed ending quantitative tightening marks an important turning point in the Bitcoin liquidity cycle. Although it may experience fluctuations in the short term due to cautious market sentiment, unlike the high interest rate environment of 2019, the institutional market structure and favorable political regulatory trends provide strong fundamental support for a long-term bull market for Bitcoin. Investors should view short-term pullbacks as accumulation opportunities and measure current market fluctuations against a long-term target of 200,000 USD.

Disclaimer: This article is for news information and does not constitute any investment advice. The crypto market experiences significant fluctuations, and investors should make decisions cautiously.