{"id":17710,"date":"2025-03-18T23:16:02","date_gmt":"2025-03-18T23:16:02","guid":{"rendered":"https:\/\/dogewisperer.com\/?p=17710"},"modified":"2025-03-18T23:16:02","modified_gmt":"2025-03-18T23:16:02","slug":"polymarket-bettors-say-theres-a-100-chance-the-fed-ends-qt-before-may","status":"publish","type":"post","link":"https:\/\/dogewisperer.com\/?p=17710","title":{"rendered":"Polymarket bettors say there\u2019s a 100% chance the Fed ends QT before May"},"content":{"rendered":"
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\"Polymarket<\/p>\n

Betters on Polymarket believe it\u2019s now a certainty that the US Federal Reserve will wind down its quantitative tightening (QT) program by May of this year, a move many analysts say could trigger the next leg of the crypto bull market.\u00a0<\/p>\n

By March 14, Polymarket\u2019s betting odds that the Fed would end QT by April 30 was 100%, which remains unchanged at the time of writing.<\/p>\n

The wager, titled \u201cWill Fed end QT before May?\u201d has more than $6.2 million in cumulative trading volume.<\/p>\n

\"Polymarket
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Polymarket users have assigned a 100% probability that the Fed will end quantitative tightening in the coming months. Source: <\/em>Polymarket<\/em><\/a><\/p>\n<\/figcaption><\/figure>\n

Polymarket is a crypto-based prediction market that lets betters wager on real-world events. It rose to prominence during the 2024 US presidential election cycle, where it accurately predicted the ascent of Donald Trump<\/a>.<\/p>\n

Quantitative tightening<\/a> is a monetary policy tool used by the Fed to draw money out of the economy by letting the bonds on its balance sheet mature. It\u2019s the opposite of quantitative easing or the balance sheet expansion that the central bank embarked on following the 2008 financial crisis.\u00a0<\/p>\n

The Fed\u2019s current QT regime has been ongoing since June 2022 as a complement to other inflation-reducing policies. In addition to raising short-term interest rates, the Fed uses QT to raise long-term rates and drain excess liquidity from the market.\u00a0<\/p>\n

Although the start of QT didn\u2019t prevent stocks and crypto prices from rallying \u2014 these markets are coming off back-to-back years of impressive growth \u2014 it has become a bottleneck due to the recent macroeconomic shocks<\/a> stemming from the Trump administration.<\/p>\n

This was predicted<\/a> in 2022 by Cambridge Associates senior investment director TJ Scavone, who said the negative side effects of QT would be felt once \u201csomething breaks\u201d:\u00a0<\/p>\n

\u201cWith QT just now ramping up, the risk it poses to financial markets appears low. Yet, adding QT to what is an already difficult and volatile market environment may worsen market conditions, increasing the risk that \u201csomething breaks\u201d from overtightening.\u201d<\/p><\/blockquote>\n

Related: <\/strong><\/em>Polymarket bets on Fort Knox audit as reserve debate heats up<\/strong><\/em><\/a><\/p>\n

QT and crypto<\/h2>\n

Crypto\u2019s strong correlation with traditional markets exposed the asset class to extreme volatility in February. By March, the S&P 500 Index was officially in correction territory \u2014 and Bitcoin (BTC<\/a>) was down roughly 30% from its January peak.\u00a0<\/p>\n

The growing belief that the Fed is ready to wind down QT is seen by many as a bullish catalyst for crypto, as more liquidity will eventually trickle down into risk assets. Combined with rate cuts in the second half of the year, there may be enough policy drivers to reverse the crypto market\u2019s multimonth downtrend.<\/p>\n

This general playbook is supported by crypto analyst Benjamin Cowen, who believes the end of QT will be followed by a broad market rally.\u00a0<\/p>\n

\"Federal
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Source: <\/em>Benjamin Cowen<\/em><\/a><\/p>\n<\/figcaption><\/figure>\n

Although the Fed hasn\u2019t confirmed whether it will wind down its QT program, the minutes<\/a> of the January Federal Open Market Committee meeting revealed that some officials were concerned about balance sheet reductions impacting the government\u2019s debt ceiling debate:<\/p>\n

\u201cRegarding the potential for significant swings in reserves over coming months related to debt ceiling dynamics, various participants noted that it may be appropriate to consider pausing or slowing balance sheet runoff until the resolution of this event.\u201d<\/p><\/blockquote>\n

Important policy changes at the Fed are coinciding with a broad pickup in the business cycle. As Cointelegraph recently reported, the US Manufacturing Purchasing Managers Index (PMI)<\/a> has been in expansion mode for two consecutive months following more than two years of contraction.\u00a0<\/p>\n

During the last two crypto market cycles, Bitcoin\u2019s peak coincided with the top of the business cycle, as expressed by the manufacturing PMI.<\/p>\n

\"Polymarket
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Bitcoin\u2019s price exhibits a strong correlation with the ISM manufacturing PMI. Source: <\/em>TomasOnMarkets<\/em><\/a><\/p>\n<\/figcaption><\/figure>\n

X Hall of Flame: <\/strong><\/em>DeFi will rise again after memecoins die down: Sasha Ivanov<\/strong><\/em><\/a><\/p>\n