On October 17, Federal Reserve Chair Jerome Powell signaled that the Fed’s balance sheet reduction program is nearing its conclusion, marking the end of a three-year cycle of quantitative tightening (QT).
While markets initially interpreted the statement as bullish, historical data suggest that balance sheet expansion often coincides with economic weakness — a “bad news is good news” scenario for risk assets.
From a liquidity perspective, the S&P 500 delivered an average annualized return of 20.9% during QT, significantly outperforming the 10.3% seen under QE conditions, indicating markets often thrive amid tightening. Powell’s remarks may therefore signal a shift toward stabilization as growth momentum weakens. The IMF also warned on the same day that global financial downside risks are rising, further weighing on sentiment.
In the crypto market, BTC briefly dipped below $107,000, with liquidation clusters concentrated between $105,000–$109,000. The next key support lies near $103,000, while resistance sits around $113,000.
According to Coinglass data, liquidity is heavily concentrated above $126,000, suggesting potential for a short squeeze and rebound in the near term.
Bitunix Analyst Insight:
Historically, when QT ends alongside a policy shift, markets often experience a “liquidity vacuum period” — risk assets may dip before a trend reversal.
Over the coming weeks, the key question will be whether capital rotates back from defensive positions into risk assets, marking a potential inflection point for global liquidity.
