Everyone suddenly started talking about QT, and now they’re already waiting for QE and a new bull market.
But what do these three letters actually mean?
Why can decisions made by people at the Fed make $BTC double — or crash by 50%?
Today, in the simplest language possible: what QT and QE are, how they’ve already crushed and fueled the crypto market, and what may come next.
If you want to understand when the market is switched to “pump mode” and when it’s “dump mode,” watch this till the end.
QE (Quantitative Easing)
When the economy is in recession, the central bank turns on the money tap.
Money printing today isn’t physical — it’s digital. The central bank buys bonds and injects massive liquidity into banks and the financial system.
More water → lower interest rates → cheaper loans → asset prices go up.
QT (Quantitative Tightening)
When inflation runs hot and bubbles inflate across markets, the tap gets shut off.
The central bank stops buying bonds, lets them mature, and does not reinvest the money.
Water drains from the pool → less liquidity → higher rates → markets struggle to grow.
How does this usually affect the crypto market?
Crypto is not a defensive asset like bonds. It’s ultra-risk.
It lives on cheap money and investor greed.
During QE:
Investors are flooded with cheap money. Bond yields are near zero, so they look for risk.
Some of that money inevitably flows into Bitcoin, Ethereum, and altcoins.During QE in 2020–2021, the total crypto market cap grew to almost $3 trillion, with Bitcoin and many altcoins hitting all-time highs.
During QT:
The opposite happens: liquidity is drained, bond yields rise, the dollar strengthens.
Investors reduce risk, take profits, and move into cash and government debt.Crypto, being the furthest end of the risk spectrum, suffers first.
Example: in 2022, at the start of aggressive QT, the crypto market fell from over $2 trillion to under $1 trillion. Many coins dropped multiple times in value — not because Bitcoin “broke,” but because liquidity was drained.
That’s why every time you hear “the Fed starts QT” or “the Fed expands QE,” it directly affects how much money can flow into crypto.
Historical liquidity cycles
QT 2017–2019
The Fed began its first large-scale balance sheet contraction.
Bitcoin exploded at the end of 2017, but by 2018 entered a classic bear market with a prolonged drawdown.
Toward the end of QT there was a strong rebound, but the real super bull run came later — after aggressive QE during COVID.
QE 2020–2021
The largest QE program in history: the Fed’s balance sheet nearly doubled.
Crypto went vertical — Bitcoin, Ethereum, altcoins, DeFi, NFTs.
A textbook example: massive liquidity → extreme risk-on → record prices.
QT from 2022
Mid-2022: the Fed hikes rates aggressively and launches QT.
Result: crypto winter, deep market drawdowns, massive liquidations, and project collapses.
End of QT and expectations of QE
In the previous cycle, when QT ended in 2019, Bitcoin received a noticeable boost.
But the real “to the moon” move only came after QE actually started.
Today, markets are again waiting for a full pivot: QT winding down, talk of rate cuts, and hints at future support programs.
That’s why many are turning bullish on crypto again.
History doesn’t repeat exactly — but it rhymes.
Every major Fed liquidity cycle has left a deep mark on Bitcoin’s charts.
Where to track metrics and monitor this yourself
Fed Balance Sheet
The main indicator.
Rising balance → money tap open (or at least not tightening).
Falling balance → QT, liquidity is being drained.
Policy Rate
Fed rates and rhetoric.
Higher and more aggressive hikes → harder for markets.
Pauses or hints of cuts → a potential shift toward a softer phase.
Inflation (CPI)
High inflation → justification to continue QT.
Falling inflation → room to deploy QE in the next crisis.
Broader markets
Watch the S&P 500, Nasdaq, and the dollar.
Crypto almost always follows them with a lag: macro markets turn first, crypto confirms later.
