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News

Federal Reserve Eases Balance Sheet Reduction Plan

2 mins mins
Key Points:

  • Federal Reserve slows balance sheet reduction, impacts market liquidity.
  • Bitcoin rises 2.1%, suggesting positive market sentiment.
  • Analysts see potential boost in dollar liquidity aiding crypto market.

federal-reserve-eases-balance-sheet-reduction-plan
Federal Reserve Eases Balance Sheet Reduction Plan

Federal Reserve Chairman Jerome Powell announced a technical adjustment to decrease the pace of balance sheet reduction, as confirmed during a recent press conference.

The decision to scale back Treasury redemptions may affect dollar liquidity, influencing financial markets and potentially boosting risk assets, including cryptocurrencies.

Federal Reserve Signals Change: Treasury Redemptions Capped at $5 Billion

Federal Reserve Chairman Jerome Powell outlined a plan to slow the reduction of securities holdings. Redemptions of Treasury securities will be capped at $5 billion, down from $25 billion. This policy adjustment is expected to continue starting in April. According to Powell, “We made a technical decision to slow the pace of decline in the size of our balance sheet. Beginning in April, we will reduce the monthly cap on Treasury redemptions from $25 billion to $5 billion.“

In response, Bitcoin experienced a 2.1% increase, trading at $43,250. This response indicates investor optimism related to potential increases in market liquidity. Raoul Pal, CEO of Real Vision, emphasized that this could be beneficial for risk assets, including crypto. Immediate statement from the SEC, however, remains absent.

Additional reaction came from GitHub activity in the crypto community, which showed stability rather than significant change. This reflects a cautious but positive market outlook among developers and investors following the Federal Reserve’s announcement.

Bitcoin Rallies 2.1% Amid Increased Dollar Liquidity

Did you know? In the past, similar decisions by the Federal Reserve to alter balance sheet reductions have frequently led to increased liquidity and minor rallies in risk assets, reflecting investor confidence in market stabilization.

Bitcoin is currently trading at $43,250, having fluctuated between $42,500 and $44,000 in recent sessions. Ethereum also saw gains, priced at $2,780, peaking amid a broader balance sheet policy shift by the Fed.

Experts have noted potential financial outcomes linked to this decision, such as improved dollar liquidity. Historical trends suggest potential for temporary asset boosts. Analysts assert these patterns align with previous Federal Reserve decisions, offering a window into potential regulatory responses and market adaptations.

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Avatar of John Kojo Kumi

John Kojo Kumi

19 March 2025, 22:29:28 GMT +0000

John Kojo Kumi is a cryptocurrency researcher and writer specializing in emerging startups, tokenomics, and market dynamics within the blockchain ecosystem. With years of experience in crypto journalism and blockchain research, he provides in-depth coverage of decentralized finance (DeFi), NFTs, and Web3 innovations.

He holds a Bachelor of Arts in Geography and Rural Development from Kwame Nkrumah University of Science and Technology, Kumasi, bringing a multidisciplinary perspective to the evolving digital asset space. As a Crypto News Writer, he tracks and reports on industry trends, while his role as a Registrar at the Commission on Human Rights and Administrative Justice reflects his commitment to governance and transparency.

His expertise spans content strategy, SEO optimization, and technical research, enabling him to craft insightful, data-driven analyses. Passionate about blockchain’s transformative potential, he strives to equip readers with the knowledge to navigate the complexities of digital assets and decentralized technologies.

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