Crypto Analyst Explains the Potential Effect of Quantitative Tightening on the Crypto Market

A cryptocurrency analyst believes the current state of the crypto market provides a perfect opportunity to plan for the future. In his latest podcast, the analyst noted that macroeconomic factors, particularly emerging policies from the US Federal Reserve, will be significant for the next phase of the crypto market.

How the Crypto Market Compares With 2019

Meanwhile, the crypto analyst compared the current Bitcoin market with what happened in 2019. One key factor that he highlighted is the Fed’s announcement about the end of quantitative tightening, just like it did in 2019. The analyst cited related patterns in the cryptocurrency market, noting that digital assets can repeat the same pattern from about six years ago.

For context, the Fed has announced that it will end quantitative tightening, a monetary policy for reducing its balance sheet to decrease its money supply and slow economic activity, by December 2025. Many analysts consider that the next big move, after the interest rate adjustments, to determine the next phase of the nation’s economy and, by extension, global finance.

Using the Ethereum example, the analyst highlighted how the cryptocurrency rallied in 2019 after the Fed ended quantitative tightening. Data from TradingView shows that the crucial macroeconomic policy triggered the most significant rally in Ethereum’s history. It led to a 4,528% rally that spanned over two years.

What to Expect From the Crypto Market

Although the analyst does not expect Ethereum to produce the same kind of rally this time, he is positive that the cryptocurrency market would benefit from the Fed’s decision to end quantitative tightening. He believes the upcoming event would lead to a liquidity boost. Therefore, for smart investors, dips in crypto prices during this period could be a good opportunity to accumulate more tokens.

In the meantime, the analyst noted that risk management is a crucial element during the current cryptocurrency cycle, citing the potential for increased volatility over the short term. He further noted that the medium to long-term trend of the crypto market will depend on how the Fed balances liquidity with interest rates.