Market turbulence doesn't necessitate quantitative easing, assert experts.

In a time when the global market is experiencing deep uncertainty and fears of a recession, the Federal Reserve still isn't convinced the situation warrants implementing a quantitative easing strategy.

To decipher the potential repercussions on the crypto market, especially Bitcoin, our team interviewed experts from 22V Research, CryptoQuant, and BingX.

Navigating 2025's Economic Storm

Markets have been battered since the new year, plagued by everything from a looming trade war between major economies to stagnating growth, recession worries, and escalating inflation.

Just two days ago, the US stock market recorded its worst start to any presidential term since Gerald Ford took office in 1974, leaving investors writhing in uncertainty. Even the crypto market wasn't immune to the mayhem – Bitcoin plummeted below $77,000 in the past month, while altcoins took an even heavier hit.

Trump's 90-day pause on most tariffs momentarily calmed investors and restored confidence. However, the future remains uncertain with the looming end of this period. Furthermore, concerns about inflation and economic stagnation continue to brew unease.

"Due to the uncertainty this change brings, [investors] have lost faith in what the future holds. Investors need to have a vision of the future and right now it is very murky, causing them to sit back and wait in a similar way to businesses having trouble making decisions about the future," Jordi Visser, Head of AI Macro Nexus Research at 22 V Research, shared with us.

Attention is now fixated on the Federal Reserve as they consider potential strategies to ease uncertainty and economic pain. Some analysts suggest a shift toward quantitative easing (QE).

Central Bank's Secret Weapon

When financial systems experience extreme uncertainty, central banks rely on a powerful tool: quantitative easing. This strategy involves banks purchasing assets such as government bonds from commercial banks and financial institutions in the open market, with the aim of lowering long-term interest rates and pushing consumer spending through higher liquidity.

The effects of QE can significantly impact Bitcoin's price, primarily through its influence on market liquidity, investor sentiment, and the perceived value of fiat currencies. The coronavirus pandemic served as a prime illustration of this dynamic.

In March 2020, the pandemic set off a global financial crisis, sending Bitcoin's price spiraling down from around $8,000 to a low of $3,800. However, the Fed's aggressive QE measures, implemented in response to the crisis, coincided with a substantial recovery in Bitcoin's price.

"In the most succinct way, quantitative easing (QE) served as a catalyst by increasing liquidity, lowering yields, and creating a risk-on environment, all of which enhanced Bitcoin's attractiveness as both a hedge and a speculative asset. The surge in 2020 established a precedent for how shifts in macroeconomic policy can influence cryptocurrency markets, a trend that remains popular with renewed QE speculation in 2025," Vivien Lin, Chief Product Officer at BingX, explained.

Armed with cheaper borrowing costs and increased liquidity, investors with a taste for risk felt more inclined to invest in Bitcoin. Investors often flock to alternative assets when faced with widespread uncertainty.

Bitcoin: An Escalator out of a Fiscal Crisis?

Recent market turbulence and geopolitical pressure have stoked investor interest in cryptocurrencies.

"Institutional investors are taking advantage of market volatility by increasing their allocations to cryptocurrencies and utilizing digital assets as a hedge against geopolitical risks. Meanwhile, retail investors are maintaining a steady approach, emphasizing long-term strategies and selective rebalancing,” Lin stated.

Lin went on to add that institutions are starting to consider cryptocurrencies a key component of their portfolios. Companies like MicroStrategy, Tesla, and Square have become notable Bitcoin accumulators, while others, like GameStop and Fold Holdings, have begun diversifying their treasuries by incorporating Bitcoin.

Julio Moreno, Head of Research at CryptoQuant, noted a similar trend among large holders.

"We definitely have seen large holders accumulating Bitcoin since prices declined below $90,000 at the end of February. The total balance of large Bitcoin holders (holding 1,000-10,000 Bitcoin) has increased from 3.39 million to 3.49 million Bitcoin since late February, an increase of ~110,000 Bitcoin. This indicates that large investors have been purchasing Bitcoin as prices declined,” Moreno shared with us.

If the Fed adopts QE, the already-apparent appreciation of Bitcoin as an alternative asset could be further bolstered, creating a conducive environment for its price.

Will We See QE in 2025?

Just last month, Arthur Hayes, former CEO of BitMEX, predicted that Bitcoin could hit $250,000 by the end of 2025 if the Fed turns to QE to support markets.

Visser echoed this view, suggesting that implementing QE now would intensify investor interest in Bitcoin.

"Bitcoin has three components to it. The first is that it is outside the fiat system, so as people doubt what is happening to the current financial system, investors are looking outside for potential investments that could be a store of value during the turbulence. The second is like fiat risk assets, it historically benefits during periods where global liquidity increases, which would occur if QE was needed. Finally, it is a digital asset and part of the growth of the digital economy. Stablecoins continue to see volume growth, and support from the US government helps the network effects for Bitcoin," he explained.

However, experts agree that the current economic situation is not gravely dire enough to require the Fed to engage in QE.

An Economic Sea Calm Enough to Skip QE

Moreno explained that although Bitcoin's volatility has risen significantly during the past few weeks, it still lags behind other periods when the market faced uncertainty.

"For example, the intra-week Bitcoin price volatility spiked to 72% on the COVID market crash in March 2020. This same metric increased to 49% after the Terra-Luna crash in May 2022, and to 31% due to the collapse of FTX in November of that same year. More recently, in March 2023, the volatility also reached 31% due to the SVB bank run. In comparison, the volatility has ranged between 8% and 21% since February, when announcements about the US tariffs started to become more frequent,” he elaborated.

Visser concurred, noting that, "For QE to occur, I think we would need to either see a significant drop-off in economic activity or more intense disruptions in the US bond market."

According to Lin, it's not an opportune time to pump liquidity into the market, given the Fed's recent downgrade of the American economy's 2025 GDP Growth forecast to 1.7% from 2.1%.

"The Fed's recent downgrade of 2025 GDP growth to 1.7% from 2.1% and heightened inflation expectations suggest a cautious approach should be taken. However, Chair Powell has emphasized flexibility in these assessments, noting that 'policy is not on a predetermined path,'” Lin stated.

This flexible approach leaves room for QE to be implemented in the future if conditions worsen.

A QE Strategy: Friend or Foe to Institutional Adoption?

Although immediate QE remains unlikely, a combination of labor market fragility, deflationary signals, and liquidity strains could overpower the current QT trajectory, particularly if geopolitical risks materialize into broader economic turmoil, Lin suggested.

Beyond affecting prices, another round of QE could significantly impact institutional adoption, regulatory scrutiny, and the overall perception of Bitcoin and other cryptocurrencies.

"Quantitative easing (QE) could serve as a means for cryptocurrency to mature further, integrating it into global finance while testing its decentralized foundations. Institutions would use this increased liquidity to develop infrastructure, while regulators would focus on implementing systemic safeguards. As a result, Bitcoin's identity would shift from being viewed merely as a speculative asset to becoming a key component of macroeconomic strategies," Lin concluded.

Only time will tell whether the economic situation necessitates such intervention. But should QE become necessary, it could generate positive momentum for the digital asset industry.

Note: This article is intended for informational purposes only and should not be considered financial advice. Always do your own research and consult with a professional before making any investment decisions.

In the face of global economic turmoil, with concerns about a recession, stagnating growth, and inflation, the Federal Reserve has yet to be convinced that quantitative easing is necessary.
Our team consulted experts from 22V Research, CryptoQuant, and BingX to understand the potential impact of these economic conditions on Bitcoin and other cryptocurrencies.
Bitcoin, the leading cryptocurrency, took a heavy hit in the past month, plunging below $77,000, and altcoins suffered even more.
Trump's 90-day pause on most tariffs momentarily calmed investors but the future remains uncertain.
In such an economic storm, Bitcoin could potentially be seen as an escalator out of a fiscal crisis, especially if the Federal Reserve resorts to quantitative easing.
The experts agree that the current economic situation is not critical enough to necessitate the implementation of quantitative easing.
However, if the Fed does adopt quantitative easing, it could further bolster Bitcoin's perceived value as an alternative asset, creating a favorable environment for its price.
QE could also significantly impact institutional adoption, regulatory scrutiny, and the overall perception of Bitcoin and other cryptocurrencies, potentially integrating them into global finance and testing their decentralized foundations.
It is important to note that this article is for informational purposes only and should not be considered financial advice. Always do your own research and consult with a professional before making any investment decisions.