Fed’s ‘Stealth QE’ Pivot Could Reshape Crypto Liquidity Backdrop

As the Federal Open Market Committee (FOMC) convenes, the crypto market’s attention is fixed on a nuance far beyond the widely anticipated interest rate decision. According to the CME FedWatch Tool, traders assign an 87.2% probability to a 0.25 percentage point cut, making the move itself a foregone conclusion. The true suspense lies in whether Chair Jerome Powell will signal a fundamental shift in the Fed’s balance-sheet policy, moving from quantitative tightening (QT) toward a new phase of liquidity injection.

The key question, as articulated by market participants, is whether the Fed will transition into a ‘reserve management’ regime centered on purchasing Treasury bills. This would be presented as a technical adjustment to ensure orderly funding markets and stable repo rates. However, for macro-sensitive traders in crypto and traditional finance (TradFi), such a program would effectively mark a pivot from draining dollar liquidity to cautiously refilling it, even if the Fed avoids the politically charged label of quantitative easing (QE).

Bank of America strategist and former New York Fed repo specialist Mark Cabana has become a central voice in this debate. In a recent client note, Cabana argues that Powell is poised to announce a program of roughly $45 billion in monthly Treasury bill purchases. For Cabana, the rate cut is secondary; the real event is this balance-sheet pivot. His analysis is rooted in the Fed’s own ‘ample reserves’ framework, which suggests that after years of QT, bank reserves are now skirting the lower bound of what the Fed considers a comfortable range.

This perspective is echoed by James E. Thorne, Chief Market Strategist at Wellington Altus, who sharpened the debate on social media platform X. Thorne posed the critical question: ‘Is Powell about to admit on Wednesday that the Fed has drained the system too far and now has to start refilling the bathtub?’ He contends this FOMC meeting is about whether Powell is forced to roll out a standing schedule of bill-heavy operations precisely because the Fed has ‘yanked too much liquidity out of the plumbing.’ In this reading, any new bill buying would be dressed up as a technical tweak rather than a confession of error, yet it would plainly rebuild reserves.

For the crypto market, with a total capitalization of $3.1 trillion at press time, the distinction between ‘real QE’ and ‘stealth QE’ is paramount but secondary to the direction of net liquidity. Analysts followed closely by digital-asset investors are already mapping the implications. Some, like Milk Road Macro on X, project a return to QE in 2026, potentially in a much weaker form. They anticipate roughly $20 billion a month in balance-sheet growth—’tiny compared to the $800bn per month in 2020’—and stress the Fed would be ‘buying treasury bills, not treasury coupons.’

This distinction creates the current tension in crypto markets. A bill-only, slow-paced program aimed at stabilizing short-term funding is fundamentally different from the broad-based coupon buying that characterized crisis-era QE, which compressed long-term yields and turbo-charged the hunt for yield across risk assets like Bitcoin. As Milk Road Macro bluntly states: ‘Buying treasury coupons = real QE. Buying treasury bills = slow QE.’ Their takeaway is that ‘the overall direct effect on risk asset markets from this QE will be minimal.’

Nevertheless, even a modest, technically framed program would mark a clear inflection point: a return to balance-sheet expansion after a prolonged period of contraction. For Bitcoin and the broader crypto market, the immediate impact of this week’s meeting will depend less on the basis-point move and more on Powell’s language around reserves, Treasury bill purchases, and future ‘reserve management’ operations. If the Fed signals that the bathtub is starting to be refilled, the liquidity backdrop that crypto trades against in 2026 may begin to take shape this very week.