The Fed’s quantitative tightening, which began in 2022, has reduced the balance sheet from $9 trillion to $6.6 trillion.
Oct 15, 2025, 8:13 a.m.
Federal Reserve Chairman Jerome Powell on Tuesday said that the central bank could soon reach a point where its long-running program to reduce the balance sheet size would need to end. Yet, BTC continues to trade in the red with derivatives pointing to persistent bearish sentiment.
“Our long-stated plan is to stop balance sheet runoff when reserves are somewhat above the level we judge consistent with ample reserve conditions,” Powell said in prepared remarks for his speech at the National Association for Business Economics conference in Philadelphia.
“We may approach that point in coming months, and we are closely monitoring a wide range of indicators to inform this decision,” he added.
The so-called quantitative tightening (QT) began in 2022 to remove the extraordinary liquidity that the Fed added to the financial system via balance sheet expansion during the coronavirus crisis. Since then, the total size of the Fed’s balance sheet has declined to $6.6 trillion from around $9 trillion.
Powell’s comments indicate that the Fed does not want to shrink its balance sheet so much that bank reserves — the funds banks hold at the Federal Reserve — fall below a level the Fed considers “ample.” Staying above this threshold is crucial to avoid disruptions in short-term funding markets and ensure financial stability.
According to the chairman, that point may be nearing as the central bank carefully evaluates market conditions, including recent increases in various overnight funding rates.
The comments come as markets anticipate two 25-basis-point Fed rate cuts by the year-end, following a similar-sized reduction in September and have raised bullish sentiment on crypto social media.
BTC Not Impressed
BTC, however, is not impressed, and neither is the broader crypto market. As of writing, the leading cryptocurrency by market value traded near $112,600, largely flat on a 24-hour basis.
Deribit-listed options tied to BTC showed one-week puts, offering downside protection, continuing to trade at a premium to calls or bullish bets. Options out to the March 2026 expiry showed a similar bearish pricing.
Perhaps it’s the market’s way of reminding the crypto bulls that a potential end to quantitative tightening doesn’t necessarily mean a quick start to a new balance sheet expansion program, like the one during COVID that greased the crypto bull market.
Moreover, the pace of QT slowed notably from mid-2024. Since April this year, the central bank has limited monthly redemptions of Treasuries to $5 billion, while maintaining the cap for mortgage-backed securities at $35 billion. So, the approaching end of QT does not necessarily signal a significant bullish or dovish surprise.
“The big takeaway from Powell’s talk today was that the QT program is likely to end soon. That is to say, the Fed is likely to stop shrinking its balance sheet in the coming months. The run rate on this balance sheet reduction was already very small, so it’s not a huge change,” pseudonymous observer Markets and Mayhem pointed out on X.
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