- The Federal Reserve officially ended Quantitative Tightening (QT) on Dec 1, halting Treasury runoffs.
- Markets slid as analysts noted active balance sheet expansion won’t resume until Q1 2026.
- Goldman Sachs forecasts a December rate cut is “locked in,” citing a surge in WARN layoff notices.
The crypto market opened December with a sharp repricing, shedding over 5% as the reality of the Federal Reserve’s “liquidity pivot” clashed with investor expectations. While the central bank officially concluded its Quantitative Tightening (QT) program on Sunday, stopping the monthly drain of Treasury securities, analysts warn that the “liquidity hose” will not be turned back on until early 2026.
Related: Fed to Stop Draining Cash From December 1, Setting Stage for Crypto Rally
Crypto Indicators Reflect Heightened Market Stress
Digital-asset performance has weakened alongside growing macro uncertainty. The total crypto market capitalization has dropped to $2.92 trillion, a 5.21% decline, while the CMC20 index has fallen 5.61% to $181.25.
Market sentiment has also declined, with the Fear & Greed Index dropping to 20, placing it within the fear zone.
Fed QT End And Data Calendar Shape Crypto Volatility
A series of key data releases is driving expectations for increased volatility.
Powell’s remarks, PMI and ISM surveys, jobless claims, trade data and the PCE inflation reading create a dense calendar that traders expect to steer risk sentiment through the week.
Market observers point to earlier tightening cycles for context. In 2019, when the Federal Reserve ended QT with its balance sheet near $3.8 trillion, expansion resumed months later and increased by about $3.2 billion over 18 months.
During that stretch, Bitcoin climbed from $3,800 to $29,000, a move analysts often cite when they study how liquidity cycles influence digital assets.
Those earlier cycles showed altcoins strengthening when broader monetary conditions shifted, including between 2014 and 2017 and again after QT ended in August 2019. These patterns still shape market expectations as participants assess how new policy signals will influence risk behavior across major tokens and smaller digital assets.
Weak Labor Data Lifts December Fed Rate-Cut Expectations
Goldman Sachs has indicated that the December 9–10 Federal Reserve meeting is now almost certain to result in a rate cut. The bank attributes weakening labor-market conditions as the primary catalyst, citing rising unemployment, higher jobless rates among recent college graduates, and increased references to layoffs in WARN notices, Challenger reports, and corporate earnings calls.
Several Federal Reserve officials have echoed this view, noting that policy adjustment remains possible in the near term. However, CME futures show traders assigning an 87% probability to a December rate cut, up from 71% just one week earlier. In addition, Goldman Sachs forecasts that the federal funds rate could fall to the 3%–3.25% range by mid-2026, with additional reductions projected for early 2025.
Related: Analysts Say Fed Liquidity Shift Could Reshape Crypto Markets: Here’s Why
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