AsterBoy Crypto Desk

The bond market is sending a message the Fed can no longer ignore.
QE is coming back and here's why.
The Fed has already cut rates by about 150 bps since September 2024.
Despite this, 10Y and 30Y bond yields are now higher than they were before the first rate cut.
That means the market believes that the Fed has made a policy mistake.
And every time this has happened in the past, the Fed has never admitted its mistake.
It has done simply one thing which is to restart QE.
And this time, it won't be any different.
First of all, the cracks in the economy are already showing.
Small US banks are facing constant liquidity stress.
They keep coming back to the Fed for emergency support, including the latest injection in December.
If small banks can’t fund themselves, the Fed will need a long-term solution, not repeated emergencies.
For the Fed, that solution is always QE.
QE works in a very direct way:
The Fed buys Treasuries → bond prices rise → yields fall → the dollar weakens → liquidity expands.
This combination is extremely bullish for risk assets.
We already saw the blueprint.
In 2020-2021, QE pushed yields down and the dollar down.
Liquidity exploded.
Risk assets had one of the strongest rallies ever.
Bitcoin went from $3.5k to $69k.
Altcoins had their most explosive pump in history.
But the banks are not the only one which is indicating a QE.
Major institutions are also expecting QE to return.
UBS expects the Fed to begin buying about $40B of T-bills per period from early 2026.
Bank of America expects the Fed to announce the RMPs which will add bank reserves.
Also, Japan's bond market is putting a lot of pressure on the Fed.
With Japan's bond yield rising, investors are dumping their T-bills which are causing yields to spike.
And the market is expecting Fed to show up in the coming months to buy these T-bills and bring yields down.
Also globally, most central banks have already restarted easing.
China is easing.
Japan is easing their financial conditions despite rising yields.
Canada is easing.
The Fed is the last holdout.
Once it joins the others, global liquidity turns sharply upward.
A return to QE means:
• Lower bond yields
• Weaker dollar
• Stronger risk appetite
• More capital flowing into BTC, ETH and altcoins
This is the same environment that triggered the 2020–2021 mega-rally and it could happen again.

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