Yesterday, the minutes from the Fed's meeting in January were released. Though nothing more could be gleaned about their stance on interest rate cuts ... they did reveal that they intended to end quantitative tightening (QT).

And we've never had an alt-season while QT is ongoing. This suggests that the Fed is finally going to provide us with the conditions needed for an alt-coin run.

Let's start with a bit of context.

1 QT and the Balance Sheet

Please note, in what follows I'm simplifying.

At base, when the Fed is engaged in quantitative easing (QE), it is adding to its balance sheet. This puts liquidity into circulation. More liquidity = good for risk-on assets (other things being equal).

When the Fed is engaged in QT, it reduces its balance sheet and this takes liquidity out of circulation = bad for risk-on assets (other things being equal).

2 Finding The Fed Statement

Unlike the interest rate discussion, QT/QE isn't easy to find. The Fed discusses its balance sheet when it addresses its Special Open Market Account (SOMA) portfolio.

In the image below, you can see that the FOMC minutes show that the FED is concerned with "the potential for significant swings" as a result of taking too much liquidity out of the market.

So, when are then ending QT? When does alt-season begin?

3 When Is The Fed Ending QT?

Below is the CME Fed Watch Tool, which tracks the implied probability of interest rates at the end of a Federal Reserve meeting. You can see that the next two meetings are in March and May. In neither one do market participants think the Fed will cut rates.

BUT

Given the language of the latest FOMC minutes, they have clearly signaled that they plan to end QT soon. So, we're looking at March or May -- probably.

4 Alt-Season Begins In March?

Don't get ahead of yourself with expectations of an alt-season beginning exactly when QT ends. Even if they pause in March, it might be a few weeks until sufficient liquidity materializes and then flows into the crypto space.

Also, if Trump moves aggressively on tariffs--all bets are off.

5 Does Trump Want to Be The Tariff President or Market President?

Ram Ahluwalia is a favorite guest on the Real Vision podcast that I host.

He made an astute observation some weeks back: Trump has to choose what kind of president he wants to be.

If he chooses to be the tariff president--and aggressively so--then markets are likely to struggle. I doubt an alt-season would materialize outside of the "majors" (e.g., $SOL).

If he continues to take the market as his "report card," then we're likely to see an end to QT soon ... and perhaps an alt-season.

Happy Trading!

NFA. DYOR.

-Sebastian Purcell, PhD

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