US Federal Reserve Chairman Jerome Powell recently stated that the Fed will soon expand its balance sheet again — effectively preparing for a new phase of quantitative easing.
The news sent crypto investors into a frenzy in anticipation of a surge in fresh liquidity. At the same time, skeptics warned that it could inflate a dangerous bubble.
Powell Hints at Quantitative Easing
The Federal Reserve has recently announced the conclusion of its quantitative tightening program, confirming plans to halt balance-sheet reductions as of December 1.
“Our long-stated plan has been to stop balance sheet runoff when reserves are somewhat above the level we judge consistent with ample reserve conditions,” Powell said at a recent press conference. “Signs have clearly emerged that we have reached that standard in money markets,” he added.
Though he described this as a “technical adjustment,” such a move would still inject liquidity into markets– a clear form of monetary easing.
The move signals a subtle shift in policy, from focusing on lowering inflation to prioritizing market stability. This psychological turning point can quickly reignite risk appetite, causing investors to return to speculative assets.
Crypto Awaits Liquidity Surge
With the Fed reopening the liquidity taps, crypto is going to be one of the first destinations for excess capital. The renewed balance-sheet expansion will inject cash into the system, lower financing costs, and fuel appetite for higher-risk assets.
Bitcoin and Ethereum, long viewed as barometers of global liquidity, would probably lead the rally, followed by altcoins and meme coins as speculative momentum builds.
The familiar narrative would resurface—“money printer go brrr” and the return of the inflation-hedge trade. Investors would regain conviction in digital assets as the purest expression of liquidity-driven optimism.
In this environment, a Fed pivot back to QE could spark the most powerful short-term bull run since 2020.
It would also supercharge the risk-on cycle before the underlying economic realities catch up. Recognizing this, the long-term risks are difficult to overlook.
A Bubble in the Making
Injecting liquidity into an already overheated economy—marked by record stock prices, low unemployment, and persistent inflation—risks blowing a classic asset bubble.
The combination of easy money, massive fiscal deficits, and speculative enthusiasm could push valuations beyond sustainable limits. Among the most vocal critics of this risk has been hedge fund manager Ray Dalio.
“The conditions in which this QE would take place are very different from those that existed when they took place before because this time the easing will be into a bubble rather than into a bust,” Dalio said in a social media post.
When inflation inevitably resurfaces and the Fed is forced to tighten again, the reversal of liquidity could be swift and severe. It would expose leveraged excesses and trigger sharp sell-offs across equities, bonds, and crypto.
What appears to be a roaring bull run today may, in time, be seen as the last surge of euphoria before the cycle turns upside down.
