Powell’s 25-bp move grabbed headlines, but it’s balance-sheet math, not policy rates, that could steer Bitcoin’s next leg.
The Rate Cut That Wasn’t the Story
The Federal Reserve trimmed rates by a quarter point today, but the real shift may be in what comes next for its balance sheet.
Chair Powell signaled that quantitative tightening is nearing its end as the Fed’s overnight reverse-repo facility has almost emptied. That means every additional dollar of runoff now hits bank reserves directly, tightening liquidity faster than before.
With reserves around three trillion and the Fed’s total balance sheet near six-and-a-half trillion, even small changes in runoff can ripple through markets, moving real yields, the dollar, and Bitcoin.
Why It Matters More Than the Cut
Real yields have been easing since midsummer, the ten-year TIPS near 1.7 percent and forward inflation expectations hovering just above two percent. The dollar index has fallen toward 99, down from early-year highs. That combination usually supports risk assets by lowering the opportunity cost of holding them.
Powell’s comment that policy is “sufficiently restrictive” and that QT adjustments may be needed to maintain “ample reserves” is what crypto traders were listening for. Liquidity guidance moves long-term real yields far more than nominal rates, and Bitcoin tends to follow those liquidity tides.
ETF data show it clearly. U.S. spot Bitcoin funds saw roughly 446 million dollars in net inflows during the week leading up to the decision. Historically, softening real yields and a weaker dollar have fueled similar ETF inflows within days of Fed meetings.
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Bitcoin’s Macro Channel
Bitcoin trades less on rate moves and more on reserve dynamics. When QT slows, reserves rise, dollar liquidity expands, and investors feel freer to take risk. As that flow resumes, it often lifts both ETF demand and spot prices.
For now, the setup looks constructive. Real yields are easing, the dollar is softening, and Powell’s tone tilted dovish. If that continues through the next few FOMC communications, Bitcoin could catch another liquidity tailwind toward the high-teens percent range seen after previous cuts.
If Powell pivots back to inflation vigilance, the rally could stall. But as the balance sheet debate replaces the rate path as the main macro driver, traders will be watching the reserve channel more closely than the dot plot.
