Federal Reserve Poised to End Balance Sheet Reduction

2 mins mins

Key Points:

Fed considers ending balance sheet reduction; affects market liquidity.
Quantitative tightening pause expected; impacts money market stability.
Indications suggest potential crypto market volatility due to liquidity shifts.

The Federal Reserve could announce this week the end of its balance sheet reduction amidst tightening financing conditions and declining bank reserves, according to Wrightson analysts.

This potential policy shift may stabilize traditional markets but increase volatility in cryptocurrencies like Bitcoin and Ethereum, highlighting the interconnectedness of global liquidity conditions.

Federal Reserve Poised to End Balance Sheet Reduction

The Federal Reserve may announce halting balance sheet reduction this week amid tightening funding conditions in the overnight repo market, Wrightson analysts suggest. The Fed’s action aims to maintain market stability.

Ending quantitative tightening could stabilize funding markets affected by tightened conditions, potentially impacting crypto volatility as liquidity adjusts globally.

“Even if the Fed believes that reserve supply remains quite adequate, we doubt whether the FOMC will ignore the repeated warning signals in recent weeks in the federal funds rate.” — Wrightson ICAP team

Market Implications and Crypto Sector Concerns

Did you know? Past pauses or reversals in Federal Reserve’s quantitative tightening cycles, like in 2017-2019, have historically led to increased equity and crypto market activity, enhancing risk asset performance.

According to CoinMarketCap, Bitcoin (BTC) is valued at approximately $115,054.93, with a market cap of around $2.29 trillion. BTC, which dominates 59.15% of the crypto market, has seen a 3.39% price increase over the last seven days. The 24-hour trading volume has experienced a notable 78.77% change, indicating heightened market activity.

bitcoin-daily-chart-3977 — Bitcoin(BTC), daily chart, screenshot on CoinMarketCap at 15:31 UTC on October 27, 2025. *Source: CoinMarketCap*

The Coincu research team expects the Fed’s pause in balance sheet reduction could stabilize the money markets and trigger reactions across crypto sectors. Historical trends suggest volatility in digital assets during such macroeconomic adjustments, but direct impacts on specific crypto tokens remain to be seen.

DISCLAIMER: The information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.