Bitcoin News Today: Fed's QT Pause Could Signal Bitcoin's Turning Point

U.S. bank reserves have fallen below $3 trillion for the second consecutive week, signaling tighter liquidity amid the Federal Reserve's quantitative tightening (QT) campaign. The decline to $2.93 trillion-the lowest since January 1-has sparked speculation that the Fed may soon pause its balance sheet reduction to stabilize financial markets. Analysts argue that this liquidity squeeze could indirectly fuel volatility in cryptocurrencies like Bitcoin, as investors anticipate shifting monetary policy.

The drop in reserves stems from multiple factors, including the U.S. Treasury's increased borrowing post-debt limit increase and the Fed's QT strategy, which allows securities to mature without reinvestment. With the overnight reverse repurchase agreement (RRP) facility nearing depletion, excess cash is being redirected elsewhere in the financial system. Federal Reserve Chair Jerome Powell has indicated that QT may slow or halt once reserves reach "ample" levels, a threshold estimated at 10-12% of GDP.

Bitcoin analyst Adam Livingston has warned that the shrinking liquidity could trigger a "mother-of-all liquidity pivots," with Bitcoin poised to benefit from the Fed's eventual policy shift. He ties the reserve decline to three concurrent forces: Treasury borrowing, QT, and rising currency in circulation. Historical patterns, such as the 2019 repo market strain and 2023 regional bank turmoil, suggest that liquidity easing often coincides with Bitcoin rallies.

The Fed's balance sheet, currently at $7.4 trillion, has shrunk from its pandemic-era peak of $9 trillion. JPMorgan Chase & Co. and Bank of America Corp. predict the Fed could stabilize its balance sheet this month, ending active QT. If reserves remain near "ample" levels, officials may prioritize preserving liquidity over further tightening, a move that analysts say could trigger a $7.4T liquidity surge into Bitcoin and stocks, potentially lowering borrowing costs and indirectly supporting risk assets.

Meanwhile, Bitcoin spot ETFs have drawn $26 billion in inflows in 2025, with BlackRock's IBIT alone accumulating $100 billion in assets. These funds have reduced Bitcoin's tradable supply, creating scarcity that could amplify price movements if liquidity improves. However, recent market turbulence, including a $19 billion liquidation event in early October, has led to weekly ETF outflows, though exchange-held Bitcoin has fallen to a six-year low, suggesting potential stabilization.

The interplay between Fed policy and crypto markets extends beyond Bitcoin. Ethereum ETFs have struggled with persistent outflows, while decentralized exchanges (DEXs) saw a 30% monthly trading volume surge in October, signaling growing adoption of decentralized protocols. Broader macroeconomic risks, including U.S. inflation and geopolitical tensions, remain headwinds, though optimism persists around potential Fed rate cuts.

Federal Open Market Committee (FOMC) deliberations next week will likely address the balance sheet's future, with markets pricing in a policy rate cut to 3.75%-4%. For Bitcoin investors, a pause in QT could foster a risk-on environment, historically linked to stronger crypto performance. As Livingston notes, liquidity inflection points-when tightening gives way to easing-have repeatedly aligned with Bitcoin's price advances.