The next market boom, and why liquidity leads and prices follow
WHERE has quantative easing gone?
The Federal Reserve has made one thing clear: interest rates aren’t coming down anytime soon.
Fed Chair Jerome Powell has repeatedly emphasised that the fight against inflation remains a top priority, and any shift toward quantitative easing (QE) is unlikely unless the economy faces a significant downturn or financial instability.
But if history has taught us anything, markets don’t wait for official policy pivots. Instead, they front-run expectations, pricing in moves before they happen. The real question isn’t if liquidity will return but when and in what form.
BITCOIN 4-year chart showing quantitative easing and tightening cycles
Why Powell is holding the line
The Fed’s current stance is centred on keeping rates “higher for longer” to maintain control over inflation. As of February 2025, the Federal Reserve’s borrowing rate remains in the range of 4.25% to 4.50%, as officials believe keeping rates elevated is necessary to balance economic risks.
Federal Reserve Governor Adriana Kugler has reinforced the need to hold rates steady, while Chicago Fed President Austan Goolsbee has stated that the Fed is taking a “wait-and-see” approach given the unpredictable effects of the Trump administration’s aggressive economic policies. (Reuters)
This is a stark contrast to the post-2008 era when the Fed aggressively injected liquidity to stabilise markets. Today, Powell and the Fed are trying to prevent a repeat of the rampant speculation fueled by easy money policies. However, maintaining this stance is becoming politically and economically complex now that Trump is back in office, as his administration prioritises market growth and financial stability ahead of the 2028 election cycle.
Markets move before The Fed does
Even if Powell resists full-scale QE, the market is already looking ahead. Big money never waits. Liquidity injections often happen subtly before the Fed makes an official policy shift. These moves come in different forms, and watching for early signs of capital flows is crucial for investors.
Here are the key indicators to monitor:
- Credit Easing: If lending conditions loosen, it signals that liquidity is creeping back into the system. The Fed may not call it QE, but the effects can be similar if banks ease credit restrictions.
- Repo Market Activity: The Fed uses repurchase agreements (repos) to manage short-term liquidity. A spike in repo interventions suggests the central bank injects cash to prevent financial market stress.
- Stealth Stimulus: Governments and central banks often inject liquidity through indirect means, such as fiscal stimulus packages, corporate bailouts, or even strategic interventions in certain markets. Keep an eye on government spending policies and emergency lending programs.
The Trump factor: Market stability at any cost?
With Donald Trump officially back in the White House, the economic landscape is shifting dramatically. Unlike Powell’s cautious approach, Trump has historically been pro-markets, pro-growth, and unafraid to pressure the Fed when economic conditions threaten stability. Now, as the 47th President, he will do everything he can to prevent a 2008-style financial meltdown on his watch.
Trump’s return signals a likely push for business-friendly policies, deregulation, and possibly fiscal stimulus to keep markets thriving. However, his administration’s aggressive policies, such as tariffs, tax cuts, and increased government spending, introduce uncertainty into the economic landscape.
While Trump has not explicitly embraced digital assets, his administration’s economic strategies could indirectly benefit the crypto market by fueling inflation and driving demand for alternative assets. (Reuters)
The bigger question is how he will handle monetary policy. While Powell’s Fed insists on maintaining a "higher for longer" rate stance, political pressure from Trump’s administration could accelerate liquidity injections through fiscal spending, tax cuts, or even direct intervention.
That means regardless of Powell’s official stance, Trump’s influence could force capital back into the system sooner than expected, reshaping not just traditional markets but also crypto’s role in the global financial system.
What this means for crypto and risk assets
For Bitcoin and the broader crypto market, liquidity is king. When cash floods the system, speculative assets thrive. Even without formal QE, early liquidity signals can set off a chain reaction that benefits digital assets.
Here’s what to expect:
- Bitcoin and crypto will react to forward-looking liquidity trends, not just official Fed policy.
- Institutional capital will front-run a shift in monetary policy, allocating funds before QE is announced.
- If a market downturn forces emergency liquidity injections, crypto could see a major bull run similar to 2020-2021.
Stay ahead of the curve
The Fed’s reluctance to implement QE doesn’t mean markets won’t price in future liquidity flows. Capital will move through subtle easing, repo operations, or outright policy shifts before the Fed officially announces.
Smart investors will watch liquidity indicators, macroeconomic signals, and political maneuvers well before the mainstream narrative catches up. And with Trump unlikely to allow a severe crash under his leadership, we may see unexpected catalysts for liquidity sooner than Powell is willing to admit.
Stay ahead of the curve, follow the money, not the headlines, here’s how…
How to follow the money: Tracking liquidity before markets move
Understanding liquidity flows is the key to staying ahead in crypto and financial markets. While Powell signals higher for longer, markets don’t wait for official policy shifts. Liquidity returns to the system before Quantitative Easing (QE) is formally announced.
So where should we look?
1. The Federal Reserve & balance sheet moves
The Fed’s balance sheet expansion is the clearest sign of liquidity returning. Watch the H.4.1 report, reverse repo (RRP) usage, and emergency lending programs like the Bank Term Funding Program (BTFP) for early signs of capital injections. A shrinking RRP means banks are redeploying cash into markets.
Where to track:
- Federal Reserve Balance Sheet (H.4.1 Report): https://www.federalreserve.gov/releases/h41/
- NY Fed Reverse Repo (RRP) Data: https://www.newyorkfed.org/markets/desk-operations/reverse-repo
2. U.S. Treasury & Government spending
The Treasury General Account (TGA) acts as a liquidity buffer. When the Treasury spends (draining the TGA), liquidity flows into markets. Deficit spending and stimulus bills also act as stealth QE.
Where to track:
- Treasury General Account (TGA) Balance on FRED: https://fred.stlouisfed.org/series/WDTGAL
3. Repo markets & credit conditions
The repo market is a leading indicator of liquidity stress. If repo rates spike, the Fed may step in to provide short-term funding, effectively injecting liquidity. Meanwhile, the Senior Loan Officer Survey (SLOOS) shows whether banks are tightening or loosening credit—more lending means more liquidity.
Where to track:
- NY Fed Repo Market Data: https://www.newyorkfed.org/markets/data-and-statistics
- Senior Loan Officer Survey (SLOOS) – Fed Data: https://www.federalreserve.gov/data/sloos.htm
4. Global central banks & sovereign wealth flows
The People’s Bank of China (PBOC) and Bank of Japan (BOJ) influence global liquidity. A Chinese stimulus or BOJ’s yield curve control (YCC) shift can push liquidity into risk assets.
Where to track:
- PBOC Liquidity & Policy Updates: http://www.pbc.gov.cn/en/
- Bank of Japan (BOJ) Yield Curve Control & Policy Changes: https://www.boj.or.jp/en/
5. Institutional & whale activity in crypto
Bitcoin moves with global liquidity. Tracking whale wallet accumulation, exchange flows, and Bitcoin ETF inflows can signal where institutional money goes before the price reacts.
Where to track:
- Glassnode – Bitcoin On-Chain Data: https://glassnode.com/
- Lookonchain – Whale & Smart Money Tracking: https://twitter.com/lookonchain
6. Stock market & risk appetite
Tech and speculative stocks react first to liquidity shifts. If ARKK, Nasdaq, and small-cap stocks start rallying, it's often a signal that liquidity is improving.
Where to track:
- TradingView – S&P 500, Nasdaq, & Stock Market Charts: https://www.tradingview.com/
Liquidity first, price later
Markets front-run policy shifts, and liquidity injections often happen before the Fed makes an official move. While Powell resists full-scale QE, stealth liquidity through repo operations, credit easing, and deficit spending can quietly fuel a market rally.
Follow the money, not the headlines. Watch the balance sheet, the repo market, and global liquidity flows because they will already be priced by the time QE is announced.
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