Polymarket bettors are buzzing with excitement as they predict a 100% chance that the U.S. Federal Reserve will halt its quantitative tightening (QT) program by May. This move could be the spark that ignites the next crypto bull run, according to many analysts.
As of March 14, Polymarket’s odds that the Fed will end QT by April 30 have hit a solid 100%, and they haven’t budged since. The wager, aptly named “Will Fed end QT before May?,” has already seen over $6.2 million in trading volume, showing just how much attention this prediction is garnering.
Polymarket, a crypto-based prediction platform, has gained fame for its accurate forecasts on real-world events. It made waves during the 2024 U.S. presidential election by correctly predicting Donald Trump’s rise to power. Now, it’s setting its sights on the Fed’s monetary maneuvers.
Quantitative tightening is the Fed’s tool for pulling money out of the economy by allowing bonds on its balance sheet to mature. It’s the opposite of quantitative easing, which flooded markets with liquidity after the 2008 financial crisis. Since June 2022, the Fed has been using QT alongside interest rate hikes to combat inflation and drain excess liquidity from the market.
Despite QT’s start, stocks and crypto have rallied in recent years. However, recent macroeconomic shocks linked to the Trump administration have turned QT into a bottleneck for growth. Cambridge Associates’ TJ Scavone warned in 2022 that QT could worsen market conditions if something “breaks.”
Crypto markets have felt this pressure, with Bitcoin and other assets experiencing extreme volatility. By March, the S&P 500 entered correction territory, and Bitcoin was down about 30% from its January peak. Yet, the belief that the Fed will soon end QT is seen as a bullish signal for crypto enthusiasts.
Analysts like Benjamin Cowen suggest that ending QT could trigger a broad market rally. With potential rate cuts later in the year, there might be enough momentum to reverse the crypto market’s recent downtrend.
While the Fed hasn’t officially confirmed winding down QT, minutes from a recent meeting revealed concerns about balance sheet reductions affecting government debt ceiling debates. Some officials suggested pausing or slowing balance sheet runoff until these issues are resolved.
These potential policy shifts coincide with a broader economic uptick. The U.S. Manufacturing Purchasing Managers Index (PMI) has been expanding for two consecutive months after years of contraction. Historically, Bitcoin’s peaks have aligned with business cycle tops, as indicated by the manufacturing PMI.
As we await further developments, crypto enthusiasts are keeping a close eye on these indicators. The anticipation is palpable—could this be the dawn of another crypto bull market? Only time will tell, but one thing’s for sure: the crypto community is ready to ride the wave.
