TLDR

• Federal Reserve expected to maintain current interest rate range (4.25% to 4.50%) with focus shifting to potential end of quantitative tightening (QT)
• Bank of America and other analysts predict Fed will pause QT until debt ceiling issues resolve
• End of QT could provide liquidity support for risk assets including Bitcoin
• Stagflationary concerns may emerge from Trump’s tariff policies affecting growth and inflation projections
• Market currently pricing in 1-2 rate cuts for 2025, but Fed may signal fewer cuts due to inflation concerns

The cryptocurrency market is looking toward today’s Federal Reserve meeting for direction. Bitcoin has been under pressure recently. Traders are watching for signs that the central bank might end its quantitative tightening program.

The Federal Reserve will announce its latest policy decision at 18: 00 UTC on March 19. This will be followed by Chairman Jerome Powell’s press conference 30 minutes later.

The Fed is widely expected to keep interest rates unchanged in the current range of 4.25% to 4.50%. This has been widely telegraphed to markets in recent weeks.

QT Program

Instead of rate changes, market participants are focused on the future of the Fed’s quantitative tightening program. The QT program has been reducing the size of the Fed’s balance sheet since June 2022.

Since the COVID pandemic, the Fed’s balance sheet had grown to a record $9 trillion. This expansion of the money supply helped fuel the crypto bull market of 2020-21.

The January Fed meeting minutes revealed discussions about possibly pausing or slowing the balance sheet reduction. Several investors believe Powell might hint at ending QT during today’s announcement.

“Late last year, Fed Chair Powell hinted that the end of QT was coming in 2025,” noted Noelle Acheson, author of the Crypto Is Macro Now newsletter. She added that such a move would signal “a new monetary regime.”

Bank of America analysts expect the Fed to announce a pause in QT until debt ceiling issues are resolved. Their March 14 client note stated they “do not expect to restart after the debt ceiling is addressed.”

Traders on Polymarket, a decentralized betting platform, currently show 100% odds that the Fed will end QT before May. This indicates strong market consensus around the timing.

An end to QT could put downward pressure on Treasury yields. Lower yields on the 10-year Treasury note might increase demand for riskier assets like Bitcoin.

However, any positive impact might be limited by concerns about stagflation. President Trump’s tariff policies have increased inflation risks while potentially slowing economic growth.

The Fed’s Summary of Economic Projections (SEP) will be closely watched for signs of stagflationary adjustments. This could include lower GDP forecasts combined with higher inflation estimates.

Recent U.S. economic data has shown some weakness in retail sales and manufacturing. At the same time, forward-looking inflation metrics have been rising, possibly reflecting the impact of tariffs.

Bank of America expects “the Fed downgrading growth and upgrading inflation this year, a small nod to stagflation.” They still predict the Fed’s dot plot will show two interest rate cuts in both 2025 and 2026.

Fed Chair Powell has emphasized patience in recent communications. In a speech to economists in New York earlier this month, he stated “there is no need to be in a hurry” as the central bank seeks “greater clarity” on the Trump administration’s policies.

Market pricing currently indicates no rate cut until at least June. Traders expect one additional quarter-point reduction and about a 50-50 chance of a third cut by year-end.

Some analysts believe even these modest expectations may be too optimistic. Thierry Wizman from Macquarie wrote: “Markets appear to have gotten too dovish on the Fed.”

The Fed might also address its management of the $6.4 trillion portfolio of Treasurys and mortgage-backed securities. Recent meetings have included discussions about the best approach to handle these assets.

For Bitcoin investors watching today’s announcement, the end of QT could provide a tailwind. But any optimism might be tempered by the Fed’s updated economic projections.

• Bitcoin futures open interest dropped $10B in 3 weeks, representing a 14% deleveraging
• BTC futures volume has rebounded 32% since late February to $57B
• Ethereum and Solana futures volumes remained flat while Bitcoin interest grew
• Binance leads futures trading with $18B of the total volume
• Historical trends suggest similar deleveraging events provided good short to medium-term opportunities

The Bitcoin futures market has experienced a significant reset in recent weeks, with open interest dropping sharply while trading volumes begin to rebound. This shift in market dynamics comes after Bitcoin reached all-time highs in mid-January 2025.

Data from CryptoQuant shows that Bitcoin futures open interest fell by $10 billion in just three weeks from February 20 through March 4. This represents a 14% decline in the 90-day change metric, marking what analysts call a “natural market reset.”

The deleveraging follows Bitcoin’s open interest reaching a record high of over $33 billion on January 17. This peak coincided with Bitcoin’s price hitting its current all-time high, suggesting the market had become heavily leveraged.

Bitcoin’s futures market has begun to show signs of recovery. According to Glassnode data, Bitcoin futures trading volume has increased by 32% since late February, now sitting at $57 billion.

This rebound in trading activity shows renewed interest in the leading cryptocurrency. However, current volumes remain below December’s peak of $74 billion, indicating the market has not fully recovered.

Futures Trading

Binance dominates the futures trading landscape with over $18 billion in volume. Other major exchanges like Bitget, OKX, and Bybit also hold large shares of the market with $10.23 billion, $8.37 billion, and $7.18 billion respectively.

The long/short ratio on Bitcoin derivatives is currently neutral to slightly bearish at 0.988 overall. Breaking this down by exchange reveals more bullish sentiment on platforms like Binance and OKX, which show ratios of 2.16 and 2.43 respectively.

This mixed sentiment suggests traders remain divided about Bitcoin’s short-term price direction. The current balance between bullish and bearish positions could lead to price volatility in either direction.

ETH and SOL Derivatives Market

While Bitcoin futures have seen increased activity, Ethereum and Solana derivatives markets tell a different story. Ethereum’s futures volume stands at $28 billion, remaining almost unchanged in recent weeks.

This flat performance for Ethereum derivatives comes despite similar downward price action across major cryptocurrencies. It suggests traders may be more hesitant about Ethereum’s near-term prospects compared to Bitcoin.

Solana has experienced even less futures market interest. Its futures volume currently sits at $8.7 billion, marking a 29% decrease from its year-to-date high of $12.2 billion.

The decline in Solana futures activity coincides with negative sentiment caused by several high-profile meme coin failures on the network. This has dampened trader enthusiasm for taking leveraged positions in the asset.

Stablecoin reserves across derivatives exchanges are increasing according to CryptoQuant. These reserves have even surpassed those on spot markets, suggesting more capital is being positioned for derivatives trading.

Despite this increase in stablecoin supply since November 2024, analysts note this has not translated into market benefits. One CryptoQuant contributor described spot markets as suffering a “demand crisis.”

Historical data suggests the recent deleveraging may create favorable conditions for Bitcoin. Past events with similar characteristics have provided “good opportunities for the short to medium term,” according to analysis from CryptoQuant.