Bitcoin May Rally Further on Cooling US Inflation and Fed QT End

• Truflation’s real-time data shows US inflation at 2.45% YoY, lower than the official 3% CPI reading, indicating a downward trend.

• Bitcoin rallied sharply post-QT end, climbing from $83,500 to near $94,000 amid expectations of policy easing.

• The CME FedWatch tool indicates 87.2% odds for a 25 basis point rate cut, boosting crypto market sentiment with total Fed assets at $6.54 trillion after $2.43 trillion in QT reductions.

Discover how cooling US inflation and the Fed’s QT end are fueling Bitcoin’s surge. Explore key data, market reactions, and implications for crypto investors ahead of the FOMC decision. Stay informed on liquidity shifts.

What is the impact of cooling US inflation on Bitcoin’s price?

Cooling US inflation, as measured by Truflation’s real-time index at 2.45% year-over-year, is providing a positive catalyst for Bitcoin’s price by heightening expectations for Federal Reserve interest rate cuts. This data, released ahead of the upcoming FOMC meeting, contrasts with the official Consumer Price Index (CPI) hovering near 3%, underscoring a broader disinflationary trend. Bitcoin has responded with a 12.6% rally from its post-Quantitative Tightening lows, trading in a range that reflects cautious optimism tied to potential monetary policy easing.

How has the Federal Reserve’s end of Quantitative Tightening influenced crypto markets?

The Federal Reserve’s decision to conclude Quantitative Tightening (QT) on December 1, 2025, marks a significant shift in the liquidity landscape for financial markets, including cryptocurrencies. During QT, the Fed’s balance sheet contracted by approximately $2.43 trillion since peaking at $8.97 trillion in 2022, with total assets now standing at $6.54 trillion as per the latest Weekly Report of Assets and Liabilities (WALCL) data from December 3, 2025. November’s runoff alone totaled about $37 billion, contributing to tighter liquidity conditions that had previously pressured risk assets like Bitcoin.

With QT’s end, the mechanical drain on liquidity has halted, alleviating concerns over money market stress. Notably, the Standing Repo Facility (SRF) usage returned to zero, a sign of stabilized funding markets according to Federal Reserve reports. This pause in balance sheet reduction, without immediate quantitative easing, positions the Fed to maintain flexibility ahead of potential rate adjustments. For crypto markets, this development enhances the appeal of Bitcoin as a liquidity-sensitive asset, historically benefiting from expanded central bank balance sheets. Data from the New York Fed highlights that similar transitions in past cycles, such as post-2020, correlated with Bitcoin price appreciations exceeding 100% in subsequent months.

Experts in monetary policy, including economists from the Brookings Institution, have noted that ending QT without market disruptions reinforces the Fed’s ability to normalize policy gradually. This backdrop supports a more favorable environment for digital assets, where institutional inflows—tracked by firms like CoinShares—often accelerate during periods of anticipated easing. As of now, Bitcoin’s price action, rallying from $83,500 to the $93,000–$94,000 range, aligns with this narrative, though sustained momentum will depend on FOMC outcomes.

Inflation in the United States might be easing up again, with real-time Truflation data highlighting a 2.45% YoY print ahead of the next FOMC decision. All while official CPI’s reading remains close to 3% – Highlighting a clear cooling trend ahead of the FOMC meeting in five days. 

The timing here is interesting, especially since the Fed also ended Quantitative Tightening (QT) as of 01 December 2025.

Source: Truflation US Inflation Index

Bitcoin, for its part, has already reacted to the same with a sharp upside move too. In fact, the timing places Bitcoin in a familiar position, front-running policy expectations as the market hunts for clarity on cuts and liquidity direction.

Frequently Asked Questions

What does Truflation’s 2.45% inflation reading mean for Bitcoin investors?

Truflation’s 2.45% year-over-year inflation figure, lower than the Bureau of Labor Statistics’ CPI of around 3%, suggests a softening economic environment that could prompt the Federal Reserve to lower interest rates. For Bitcoin investors, this translates to heightened market liquidity and reduced opportunity costs for holding non-yielding assets like BTC, potentially supporting price appreciation as seen in the recent 12% rally from post-QT lows.

Will the end of Fed QT lead to immediate Bitcoin price gains?

The Federal Reserve’s cessation of Quantitative Tightening on December 1, 2025, stops the ongoing reduction in its balance sheet, which had drained $2.43 trillion in liquidity since 2022. While this creates a more supportive backdrop for Bitcoin by easing financial conditions, immediate price gains depend on broader factors like FOMC rate decisions and global risk appetite. Historical patterns from Federal Reserve actions indicate gradual positive effects on crypto over quarters, not days.

Key Takeaways

• Inflation Cooling Signal: Truflation data at 2.45% YoY points to disinflation, contrasting official CPI and boosting rate cut expectations to 87.2% via CME FedWatch.
• QT’s Liquidity Impact: Ending QT halts $37 billion monthly runoffs, stabilizing markets with Fed assets at $6.54 trillion and zero SRF usage.
• Bitcoin’s Response: BTC surged 12.6% to $93,000–$94,000 range, positioning it to benefit from policy easing into 2026 if cuts materialize.

Conclusion

The convergence of cooling US inflation per Truflation’s metrics and the Federal Reserve’s termination of Quantitative Tightening underscores a pivotal moment for Bitcoin and the broader crypto ecosystem. With real-time data revealing a 2.45% YoY rate and official figures near 3%, alongside a balance sheet pause at $6.54 trillion, markets are pricing in a 87.2% chance of rate cuts that could usher in sustained liquidity. As the FOMC meeting approaches, investors should monitor these developments closely, preparing for potential upside in Bitcoin’s price trajectory through Q1 and Q2 of 2026 while remaining vigilant to any policy surprises.

QT shutdown changes the liquidity backdrop

The Fed’s balance sheet tells the second half of this story. Total assets peaked near $8.97 trillion in 2022. The most recent WALCL reading from 03 December placed assets near $6.54 trillion – Reflecting about $2.43 trillion in cumulative drawdowns through QT2.

November alone saw roughly $37 billion in run-offs, even as the Standing Repo Facility returned to zero usage.

Source: X/Wolf Richter

That zero SRF print may be a sign of calm money markets. It also might support the view that the Fed can pause balance sheet shrinkage without triggering stress.

QT officially ended on 01 December. The mechanical liquidity drain has stopped, even if QE has not started yet. 

How did Bitcoin’s price react?

On the 4-hour chart, Bitcoin’s price rallied by roughly 12.6% from the post-QT low, climbing from $83.5k towards the $93k–$94k band. Market bulls defended the $90.9k area as near-term support after the initial squeeze, while sellers still capped momentum near its most recent local highs.

Source: TradingView

At the time of writing, the world’s largest cryptocurrency seemed to be trading in a tight range – One that highlighted macro hesitation, rather than pure technical weakness.

Rate-cut odds sharpen the setup

Finally, according to the CME FedWatch tool, the probability of a 25 bps cut has now surged to 87.2%. Also, only 12.8% of traders expect the Fed to leave rates unchanged.

If that cut lands and inflation continues to cool down, BTC could see pricing conditions ease into Q1–Q2 2026. If the Fed pushes back, the recent 12% pop risks turning into a deeper consolidation.

Final Thoughts

• Truflation data revealed inflation at 2.45% YoY, down from 2.7% in November, while the BLS CPI reading on the widget sat near 3.0%.
• QT ended on 01 December, with BTC rallying by about 12% from its post-QT low after traders priced softer policy into 2026.