The Federal Reserve’s quantitative tightening (QT) program is officially over, according to analysts from Kobeissi Letter, marking the end of a three-and-a-half-year effort to reduce excess liquidity in the financial system.
The US central bank’s balance sheet shrank to $6.53 trillion in November, its lowest level since early 2020, unwinding about half of the emergency stimulus added during the pandemic.
This move marks the final chapter of the Fed’s QT program, which officially ended on December 1st.
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Quantitative Tightening is when the Federal Reserve pulls money out of the financial system by shrinking its balance sheet. This move typically pushes long-term interest rates higher and tightens financial conditions.
It’s the opposite of Quantitative Easing (QE), when the Fed effectively “prints” money to buy bonds, injects liquidity into markets, lowers long-term rates, and helps support the economy during times of stress.
QT Explained
According to Kobeissi, over the last three and a half years, the Fed has pared back its holdings by $2.43 trillion, or about 27%, effectively draining half of the massive liquidity it injected during the pandemic.
In total, the Fed has now unwound 51% of the $4.8 trillion in emergency asset purchases used to stabilize markets during the 2020 COVID crisis. Kobeissi’s chart shows that Fed assets exploded from $4.2T in Feb 2020 to a peak of $8.9T by mid-2022, with a near-vertical spike in April 2020 as trillions in QE flooded markets to backstop bonds and loans.
Breaking down the balance sheet, Treasury holdings, or the backbone of the Fed’s portfolio, dropped $4 billion in November to $4.19 trillion, down $1.58trillion (27%) from the June 2022 peak to the lowest level since mid-2020.
Mortgage-backed securities saw an even larger pullback in November, down $16 billion to $2.05 trillion, their lowest point since late 2020.
What the End of QT Means for Markets
The end of the Federal Reserve’s quantitative tightening program marks a meaningful shift in the liquidity backdrop for global markets.
By shrinking its balance sheet to $6.53 trillion, the Fed has effectively drained more than half of the emergency money it injected during the pandemic.
And while QT itself is “bearish,” ending it means the Fed is no longer pulling liquidity out of the financial system. This removes one of the biggest pressures that weighed on markets throughout the 2022–2024 cycle.
Financial analysts on X have been echoing the same message in recent days. Borrowing becomes somewhat easier, which allows interest rates and mortgage rates to move lower. This kind of environment is typically very supportive for growth stocks, technology companies, small-cap equities, real estate, and cryptocurrencies.
However, Ted Pillows takes the opposite view and points to what happened in the altcoin market after the Fed ended its previous QT cycle in Q3 2019.
“Alts dropped 40% more and didn’t bottom until the Fed started QE. This time, it won’t be any different. Until new liquidity enters the market, alts will keep on making new lows.
Why This Matters
The end of QT removes one of the Fed’s biggest market pressures, creating a more favorable environment for risk assets, though sustained gains may depend on future liquidity injections.
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People Also Ask:
QT is when the Federal Reserve shrinks its balance sheet by letting bonds and securities mature without reinvesting, effectively removing money from the financial system. It typically pushes long-term interest rates higher and tightens liquidity.
QE injects liquidity by buying bonds, lowering long-term rates, and supporting markets during crises. QT is the opposite — it withdraws liquidity and tightens financial conditions.
Ending QT stops the Fed from actively draining liquidity, easing market pressure. Lower borrowing costs and calmer financial conditions can be supportive for risk assets, including cryptocurrencies.
It could create a more favorable environment for risk assets, but sustained rallies often require additional liquidity or supportive macro conditions.
