- Three Fed rate cuts in 2025 did not spur a crypto rally; major tokens and market cap fell sharply after October.
- If the Fed pauses further cuts in Q1 2026, analysts warn Bitcoin and Ether could decline significantly.
- Ending quantitative tightening and new Reserve Management Purchases (RMPs) act as a form of “stealth QE” that may add liquidity and stabilize crypto prices.
- Data disruption from a U.S. government shutdown raised questions about recent inflation readings, complicating policy signals.
The U.S. Federal Reserve cut interest rates three times in 2025, mainly in the final quarter, after unemployment rose slightly and inflation showed signs of cooling. Major cryptocurrencies sold off instead of rallying, and total market capitalization dropped by more than $1.45 trillion from its October peak.
John Williams emphasized caution on further easing, saying “I don’t personally have a sense of urgency to need to act further on monetary policy right now, because I think the cuts we’ve made have positioned us really well.” He added the Fed wants to see inflation reach 2% without harming the labor market.
Some economists, including Robin Brooks, warned that data collection problems during the U.S. government shutdown may have distorted November inflation figures. That uncertainty likely reduced market confidence in rate cuts alone as a driver for crypto gains.
On Dec. 1 the central bank ended quantitative tightening and began full rollovers of maturing securities, then started Reserve Management Purchases (RMPs) of about $40 billion in short-term Treasury bills to support bank reserves. Quantitative easing (QE): large-scale central bank asset purchases to increase money supply. Reserve Management Purchases (RMPs): short-term Treasury bill buys to stabilize bank reserves.
Analysts note QE in 2020–21 expanded the Fed balance sheet by roughly $800 billion per month while crypto market cap rose by about $2.9 trillion. Jeff Mei at BTSE said Bitcoin could fall to $70,000 and Ether to $2,400 if rates stay unchanged in Q1 2026, while continued RMPs and ETF flows could support higher ranges. “Ethereum could push toward $3,600, benefiting from recent layer-2 scaling improvements and restaking yields that attract DeFi users.”
This article does not contain investment advice or recommendations.
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