Wall Street Prepares for $6.6T Fed Shift as Bitcoin Surges
Bitcoin has experienced significant fluctuations this month as Elon Musk raises concerns, prompting warnings of an “imminent dollar and financial crisis” that unsettle traders. The bitcoin price has rebounded from a “flash crash” that drove it near $100,000 per bitcoin, rising nearly 10% to surpass $111,000 as Changpeng “CZ” Zhao makes a significant $28 trillion bitcoin prediction. As U.S. President Donald Trump considers a $2,000 Covid stimulus check-style tariff dividend, Wall Street giants are preparing for the Federal Reserve to halt the reduction of its $6.6 trillion balance sheet, referred to as quantitative tightening. This move is anticipated to trigger a new wave of central bank money printing, potentially propelling bitcoin to a price of $1 million.
“Starting in next year, we’re going to see an acceleration of money printing at least out of the United States,” Arthur Hayes said in a interview, pointing to a speech earlier this month by Fed chair Jerome Powell. “[Quantitative tightening] is over.” They are set to release trillions of dollars into the mortgage markets. “Rates are coming down and so the environment is ripe for appreciation of assets.” The Fed’s quantitative tightening program, initiated in 2022, has decreased the Fed’s balance sheet to $6.6 trillion, down from approximately $9 trillion at its peak, exerting pressure on risk assets like bitcoin as the Fed aims to withdraw liquidity from the system. “Our long-stated plan is to stop balance sheet runoff when reserves are somewhat above the level we judge consistent with ample reserve conditions,” Powell stated during his speech, simultaneously indicating the possibility of additional interest rate cuts. This week, analysts predicted the Fed will this month stop shrinking its $6.6 trillion balance sheet, ending a process designed to remove liquidity from financial markets.
“Money markets at current or higher levels should signal to the Fed that reserves are no longer ‘abundant,’” Mark Cabana and Katie Craig wrote. Meanwhile, the Fed is widely expected to cut interest rates again, shaving off another 25 basis points next week after resuming its rate cutting cycle in September—something that is also anticipated to fuel risk assets such as bitcoin as cash more easily flows around the system. The delayed consumer price index report for September released on Friday indicated that U.S. inflation increased less than anticipated, reaching 3% last month, which is below the 3.1% forecasted by economists. “Given the latest news on layoffs, some analysts may be wondering if the central bank should go for a bigger cut, if not this month, then maybe in December,” stated David Morrison. “The Federal Reserve has made it clear that it is far more worried about the labour market than it is about inflation.”
The bitcoin price has mirrored gold’s rally over the past year, with both assets experiencing significant gains as part of the “debasement trade.” This trend has prompted traders to seek refuge in hard assets such as gold, silver, and bitcoin as safeguards against the effects of money printing and inflation that erode the dollar’s purchasing power. “[Gold and silver are] really being purely valued on fiat debasement, whereas bitcoin and crypto still have this connection to U.S. big tech, which I think they’ll shed at some point,” Hayes told. “But in any event, we know which direction the world is heading.” It represents further debasement of fiat currency. Individuals with foresight, observing the current landscape, are making their choices clear through their financial decisions, expressing, ‘I want gold.’ I desire bitcoin. I desire silver. I want stocks. “I just think that crypto is the fastest horse.”
