Bitcoin Eyes Rebound After Fed’s Rate Cut and Liquidity Plan

• The Fed cut rates by 25 basis points and plans a $1.5 trillion liquidity injection.
• Bitcoin briefly dipped to $109K, but added liquidity could soon revive market momentum.
• The shift from tightening to easing mirrors 2019, when a similar policy sparked a major rally.

The Federal Reserve has shifted gears. The central bank made a decisive policy reversal on October 29 by lowering interest rates by 25 basis points following months of tightening. Alongside the rate cut, the Fed revealed plans to inject $1.5 trillion into the financial system as it winds down quantitative tightening. This twin move marks the strongest sign yet that monetary conditions are turning easier heading into 2026.

Markets reacted swiftly to the announcement. Bitcoin dipped to $109,000 in early trading as volatility surged following the Fed’s statement. However, analysts say the combination of lower rates and a liquidity boost could soon tilt momentum back toward risk assets.

Fed Ends QT and Signals a Liquidity Wave

According to the Fed’s statement, the target rate now ranges from 3.75% to 4.00%. The cut extends September’s easing and confirms policy pivot toward supporting growth amid cooling inflation and a softer labor market. Beginning December 1, the Fed will stop allowing Treasury holdings to mature off its balance sheet. Instead, it will inject fresh liquidity into the banking system.

This decision effectively ends the quantitative tightening cycle that began in 2022. During that period, the Fed reduced its balance sheet by more than $1 trillion to control inflation. The reversal now introduces a fresh wave of liquidity, estimated at $1.5 trillion. This amount is set to circulate through global financial markets over the next year.

Growing liquidity has frequently increased risk appetite in previous cycles. As borrowing costs decline and dollar reserves rise, stocks, credit markets, and digital assets generally gain. Traders are already positioning for a “risk-on” rotation similar to the 2019 rally. During that period, the Fed’s pause in QT fueled a surge in Bitcoin and altcoins.

Bitcoin and Crypto Markets Eye Renewed Inflows

Bitcoin’s brief dip to $109,000 reflected short-term uncertainty rather than structural weakness. Crypto traders started framing the move as the setup for a rebound within hours of the announcement. Speculative markets are typically favored by increased liquidity and declining yields, and digital assets often respond to these changes more quickly.

Historical data support the pattern. In just a few months after the Fed ended QT in 2019, the value of Bitcoin tripled. When QT resumed in 2022, crypto markets reversed course and began a prolonged decline. With QT once again coming to an end, parallels to earlier recovery cycles are clear.

Related: Markets Bet Big on Fed Rate Cut as Traders Eye Liquidity Shift

According to market strategist Diana Sanchez, the $1.5 trillion liquidity plan could “flip the narrative fast” after the initial volatility. She described the market’s current mood as “the calm before the next move.”

Fed liquidity has historically been one of the strongest catalysts for Bitcoin. When the central bank injects money, investors often rotate into risk assets seeking higher returns. The same dynamic has driven every major crypto bull run over the past decade.

While the immediate response is still unclear, the macro setup appears poised for fresh inflows. Lower borrowing costs, expanding liquidity, and growing institutional participation form a powerful combination heading into the new year.

As markets absorb the implications of the Fed’s pivot, attention now shifts to how fast liquidity will enter the system. If the $1.5 trillion injection unfolds as planned, it could restore confidence across asset classes and reignite momentum in Bitcoin.