Analyze the impact of the Federal Reserve's policy of ceasing the reduction of its balance sheet on the cryptocurrency asset market.

Starting from December 1, 2025, the Federal Reserve will officially end its three-year balance sheet reduction policy. This article aims to objectively assess the potential impacts of this monetary policy shift on the global liquidity environment, the cryptocurrency market, and discuss the opportunities and challenges that emerging blockchain projects may face.
One, Analyze the policy context and mechanisms
The balance sheet reduction plan initiated by the Federal Reserve in 2022, through not reinvesting maturing assets up to $95 billion per month, including $60 billion in government bonds and $35 billion in mortgage-backed securities, has withdrawn liquidity from the financial system. By November 2025, this action had helped reduce the balance sheet size by about $1.5 trillion, with bank reserves decreasing to $2.8 trillion, the lowest level since 2022.
According to the latest decision of the Federal Open Market Committee (FOMC), the process of shrinking the balance sheet will end in December 2025, after which it will enter a phase of balance sheet size stabilization. This action means that:
• Turning point of liquidity: The state of net cash flow out of the market has ended, and the monthly liquidity environment has improved by about 250-350 million USD.
• Policy signal: Creating conditions for potential future quantitative easing (QE), but Chairman Powell has clearly stated, "Rate cuts in December are not yet determined," indicating that the Federal Reserve still maintains a cautious stance based on data.
• Impact of exchange rates: The US dollar index may be supported in the short term by hawkish statements, but the probability of facing pressure in the medium and long term is increasing.
Two, the structural effects of the cryptocurrency asset market.
Short-term prospects (1-3 months)
• Market volatility can increase significantly due to differences in the understanding of policies between the two buying and selling parties.
• Bitcoin (BTC) is expected to maintain a fluctuating trend within the current price range, requiring observation of the cash flow data from institutions.
• Major assets like Ethereum (ETH) are facing a directional choice.
Medium and long-term prospects ( after 2026)
Historical experience shows that six months after the U.S. Federal Reserve ended its balance sheet reduction in September 2019, BTC prices rose from around $8,000 to $13,000, with an increase rate of 62.5%. The current environment has similarities to 2019:
• Improving the liquidity environment often benefits high-risk assets
• The allocation demand of institutional investors may be released when the policies become clear.
• It is important to note that the scale and maturity of the current market cannot be compared to the past, and simple comparisons have their limitations.
Dad, Framework for evaluating emerging project opportunities
Taking the decentralized AI power project (GAIB) as an example, analyze the potential logic of such assets during the liquidity transition phase:
1. Analyze the suitability of the racetrack
• Time window: The launch time of the project's mainnet coincides with the effective date of the Federal Reserve's policy, which may benefit from the market's increased risk appetite.
• Industry growth: The annual growth rate of AI power demand is expected to exceed 60%, and the Blockchain + AI integration field is in its early stages.
• Valuation Consideration: If the market value of the project is indeed at 200 million USD ( requires independent verification ), there may be early valuation advantages, but caution is needed regarding liquidity risks.
2. Evaluate the core factors
• Implementing technology: Validating the business model of the decentralized computing network is essential, and it is necessary to consider the authenticity and sustainability of customer contracts.
• Team platform: The profiles of the core members need to be cross-verified through public channels to avoid risks from single sources of information.
• Building the ecosystem: The number of test network nodes, the growth rate of developers, and other data need to reference the official on-chain data, and be wary of exaggeration in marketing.
3. Reminder about risks
• Transparent information: GAIB is an emerging project, and the disclosure of information may not be complete. Investors need to review the whitepaper, source code, and audit reports themselves.
• Market volatility: The volatility of altcoins with small market values often exceeds 3-5 times that of BTC, with high risks from leverage and concentrated positions.
• Uncertain management risk: The dual management risks of AI and encryption of assets are still not completely clear.
Four, investment strategy and risk management proposal
Asset allocation principles
1. Core position: BTC is the foundation of the investment portfolio, so it should account for no less than 50%, maximizing its liquidity and risk-hedging properties.
2. Satellite position: The new project configuration should not exceed 15-20% of the total assets and needs to be diversified across 2-3 different sectors.
3. How to participate: Participating in the airdrop through interacting with the testnet is a low-risk way to participate, but time costs need to be calculated.
Risk control mechanism
• Discipline of cutting losses: When the losses of a project reach 15-20%, it is necessary to cut positions to avoid further losses.
• Position management: Avoid using leverage exceeding 10% of total assets
• Continuous verification: Regularly monitor the project's GitHub updates, the number of active addresses on the chain, the protocol's revenue, and other hard metrics.
V. Conclusion and Warning
The Federal Reserve's cessation of balance sheet reduction is indeed an important macro variable for the encryption market, potentially opening up a new cycle of revaluation for risky assets. However, history will not simply repeat itself; the current market environment is much more complex:
• Delayed liquidity transmission: The transmission cycle from policy to market can take 6-18 months.
• The differentiation of projects is increasing: only those projects with real users, continuous revenue, and the ability to innovate technology can survive the cycle.
• Asymmetric information risk: The verification data of early projects like GAIB is difficult, and caution is needed against "survival bias" propaganda.
Important statement: This article is only a macroeconomic analysis of the blockchain industry and does not constitute any investment advice. The cryptocurrency market has a very high level of risk and uncertainty, and investors may lose their entire investment. All decisions should be based on independent research and strict compliance with the legal regulations in their jurisdiction. For specific information about the projects mentioned in the text, be sure to verify through official channels, and be wary of misleading advertisements and fraud risks. (