Bitcoin (BTC) could soon see a trend reversal as leading prediction market platform Polymarket forecasts the US Federal Reserve (Fed) ending quantitative tightening (QT) by April 30. An end to restrictive monetary policy could provide a much-needed boost for risk-on assets like BTC.
Fed Likely To End QT Before May
Bitcoin has dropped nearly 13% over the past month due to a mix of unfavorable factors, including US President Donald Trump’s trade tariffs and the Fed’s restrictive monetary stance.
Over the past two months, the leading digital asset has tumbled from an all-time high (ATH) of $109,588 on January 19 to trading in the low $80,000 range at the time of writing – wiping out more than $400 billion from its market cap.
However, the tide may soon turn for the flagship cryptocurrency. Leading prediction market platform Polymarket now projects a 100% chance that the Fed will end its restrictive monetary policy – QT – before May. Such a shift is expected to benefit risk-on assets, including cryptocurrencies.
For the uninitiated, QT is a monetary policy where the central bank reduces its balance sheet by selling government bonds or letting them mature without reinvesting, effectively pulling liquidity out of the economy. For Bitcoin, this often leads to lower prices because less liquidity means less cash available for riskier assets like crypto.
QT is one of the key monetary tools the Fed uses to restrict liquidity in the economy. The other primary tool is raising short-term interest rates, which discourages borrowing and investment in riskier assets, typically leading to price corrections in both stocks and cryptocurrencies.
The Fed began its current QT cycle in June 2022, aiming to tighten market liquidity and combat rising inflation – a byproduct of pandemic-era stimulus measures. The February Consumer Price Index (CPI) report shows inflation has cooled to 2.8%, nearing the Fed’s long-run inflation target of 2%, suggesting that QT may have achieved its intended effect.
Q2 2025 To Be Bullish For Bitcoin?
If Polymarket’s predictions prove accurate and the Fed halts QT before May, Q2 2025 could turn bullish for Bitcoin and other cryptocurrencies. Benjamin Cowen, CEO of Into The Cryptoverse, echoed this sentiment, recently stating that an end to QT would likely trigger a market rally.
Recent pro-Bitcoin remarks from Fed Chair Jerome Powell have added further optimism about the cryptocurrency’s recovery potential. However, concerns persist over Bitcoin’s continued behavior as a speculative asset rather than a stable store of value.
Despite this, institutional confidence remains strong. Asset management firm ARK Invest recently invested another $80 million in BTC, reinforcing faith in the digital asset’s long-term potential. At press time, BTC trades at $83,707, up 1.2% in the past 24 hours.
Featured Image from Unsplash.com, charts from Polymarket and TradingView.com
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