Fed Halts QT, Crypto Balances Hopes for Rate Cuts Amid Regulatory Challenges

The Federal Reserve has officially ended its quantitative tightening (QT) initiative, signaling a significant change in its approach to monetary policy that may influence financial markets, including cryptocurrencies. On October 29, the central bank’s policy committee revealed it would stop shrinking its balance sheet—a process that began in June 2022 to absorb excess liquidity from pandemic-related stimulus. "The Committee decided to conclude the reduction of its aggregate securities holdings on December 1," the Fed announced, reaffirming its dedication to reaching a 2% inflation goal while fostering strong employment levels

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This move to wrap up QT comes after increasing strains in money markets, where short-term lending rates were climbing due to tighter financial conditions. Fed Governor Chris Miran stressed the importance of regulatory reforms to keep banks’ balance sheets adaptable as the central bank reduces its market presence. "We first have to get the regulations right," Miran commented, noting that the October 29 decision to halt the balance sheet runoff was

. The Fed’s balance sheet, which , has now declined to about $6.6 trillion after letting more than $2 trillion in bonds mature without reinvesting.

For digital assets, the Fed’s change in direction could bring both opportunities and challenges. While easing QT might relieve some upward pressure on interest rates—which have traditionally been a headwind for riskier assets like crypto—the overall economic outlook remains unpredictable.

ETFs, for example, experienced an unprecedented $523 million in withdrawals in November as investors adjusted to a lower likelihood of rate cuts in 2025. , highlighting investor caution as another round of Fed tightening could be on the horizon.

At the same time, the crypto industry is evolving to meet new regulatory and financial realities. European fintech Clapp Finance recently introduced multi-collateral crypto credit lines, enabling users to obtain liquidity without liquidating their assets. This offering, which accepts up to 19 different cryptocurrencies as collateral, responds to the rising need for adaptable financing solutions in a market still facing volatility and liquidity challenges

. CEO Ilya Stadnik described this innovation as a way to address the inflexible nature of traditional CeFi lending, which has experienced .

Meanwhile, major institutions are working through regulatory developments and industry consolidation. Bullish, a crypto exchange serving institutional clients, reported a record net income of $18.5 million in Q3 2025, largely due to its U.S. spot and options trading business. Despite these strong results, its stock price has fallen nearly 40% since August, reflecting broader market unease in crypto

. Likewise, Kraken’s confidential IPO filing highlights the industry’s drive to tap into traditional capital markets, even as political uncertainty grows ahead of the 2026 midterm elections .

The Fed’s policy adjustment also ties into wider economic trends.

that the European Central Bank may take a more accommodative stance than markets currently expect, a perspective that differs from recent remarks by ECB President Christine Lagarde. In the U.S., the probability of Fed rate cuts in December is now seen at 46%, making it a crucial factor for risk assets. A leaner Fed balance sheet, as , could further challenge market stability, especially in crypto, where liquidity and regulatory risks are still significant.

As the Fed shifts course, the crypto industry’s reaction will depend on how it manages the interplay between regulatory support and broader economic challenges. Developments like Clapp’s credit products and ETF trends show the sector’s resilience, but continued progress will require skillfully navigating the complex landscape of monetary policy, investor sentiment, and institutional participation.