Executive Summary
Federal Reserve Chair Jerome Powell indicated the central bank might soon conclude its quantitative tightening program, yet Bitcoin (BTC) sentiment in the options market remains bearish, with BTC trading largely flat. This development follows a period where the Federal Reserve reduced its balance sheet from $9 trillion to $6.6 trillion since 2022.
The Event in Detail
On October 14, 2025, Federal Reserve Chair Jerome Powell stated that the central bank's balance sheet reduction program, known as Quantitative Tightening (QT), could end “in the coming months.” Since its inception in 2022, QT has decreased the Fed’s holdings from nearly $9 trillion to $6.6 trillion. Powell's remarks, delivered in Chicago, hinted at upcoming rate cuts during the October and December 2025 Federal Open Market Committee (FOMC) meetings, with an 83% probability of a September rate reduction already priced into markets. This shift reflects a strategic recalibration to avoid stifling economic growth and addresses a rapidly weakening labor market with rising downside risks to employment. Powell emphasized the need to “take another step toward a more neutral stance” in monetary policy. He also warned that removing the Interest on Reserves (IOR) system could complicate short-term rate control and potentially harm market stability. The timing of Powell's speech coincided with renewed US-China trade tensions, following former President Trump's threat of 100% tariffs on Chinese tech imports, which previously triggered a $19 billion crypto liquidation, predominantly in long positions.
Market Implications
Following Powell's speech, Bitcoin (BTC) initially fell 1.41% to approximately $112,000, before rebounding to $115,718.13, having previously exceeded $126,000. The total crypto market capitalization stood at $3.82 trillion. Despite the dovish signals regarding QT, sentiment in the Bitcoin options market remained bearish. Traders accumulated put options at the $115,000 and $95,000 strike prices expiring October 31, while simultaneously selling call options at the $125,000 strike for the October 17 expiry. This indicates a prevailing expectation of price stagnation or decline. The S&P 500 concluded the day slightly down by 0.16% at 6,644.31, reflecting ongoing concerns over tariffs and global demand, though futures later turned positive. Analysts noted that while ending QT signals an end to balance sheet contraction, it does not imply an immediate commencement of Quantitative Easing (QE), or "money printing," which would inject new liquidity. However, lower interest rates reduce the opportunity cost of holding non-yielding assets, potentially enhancing the attractiveness of scarce assets like Bitcoin as an inflation hedge. A weakening U.S. dollar has also prompted global investors to seek alternatives to fiat currencies.
AInvest research suggests that the Federal Reserve's 2025 dovish pivot, characterized by the conclusion of QT and anticipated rate cuts, is expected to bolster crypto liquidity and institutional demand. This is supported by significant institutional inflows into Bitcoin and Ethereum (ETH) exchange-traded funds (ETFs), with Bitcoin ETFs alone attracting $46.6 billion. Staking yields of 4.5–5.2% further contribute to adoption. Regulatory developments, such as the CLARITY Act, and a weakening dollar are accelerating crypto adoption, with the U.S. Strategic Bitcoin Reserve legitimizing the asset class. On-chain data from October 2025 showed a 25% reduction in Bitcoin exchange balances and 3.8 million BTC held by institutions, indicating sustained accumulation. Policy survey respondents from the Federal Reserve anticipate QT concluding by mid-2025.
Broader Context
The institutional adoption of Bitcoin reached a critical juncture in 2025, with a 40% surge in publicly traded companies holding Bitcoin in Q3 2025. A total of 172 firms now collectively hold 1.02 million BTC, valued between $117 billion and $118 billion. This represents a paradigm shift, where Bitcoin is increasingly viewed as a strategic asset rather than a speculative risk. Companies such as MicroStrategy (640,031 BTC) and Metaplanet are significantly expanding their holdings. Bitcoin is recognized for its role as a long-term reserve asset, a hedge against inflation, and a portfolio diversifier, exhibiting a three-year correlation of 0.32 to the S&P 500 and a negative correlation of -0.08 to bonds. BlackRock's iShares Bitcoin Trust (IBIT) has dominated the market, capturing 89% of inflows and managing $86.3 billion in assets. By Q3 2025, ETFs held 6.8% of the total Bitcoin supply, surpassing mining output and contributing to a scarcity-driven price dynamic. BlackRock's crypto-related holdings, including a $4.23 billion stake in MicroStrategy, reflect institutional confidence in the asset class.
source:[1] Bearish Bitcoin (BTC) Sentiment Persists Despite Powell’s Signal That QT May Be Nearing End (https://www.coindesk.com/markets/2025/10/15/b ...)[2] Federal Reserve Policy Shifts and Their Impact on Crypto Markets - AInvest (https://vertexaisearch.cloud.google.com/groun ...)[3] Powell Speech Hints at Rate Cuts as Trade War Escalates - Coin Gabbar (https://vertexaisearch.cloud.google.com/groun ...)
Edgen Crypto·Oct 15 2025, 08:32
