If the Federal Reserve pauses rate cuts in Q1 2026 with persistent inflation pressure, BTC could fall to $70,000 and ETH might drop to $2,400.
Key Takeaways:
Fed inaction could pressure cryptocurrencies, but "stealth QE" may cushion downside risks.
Liquidity matters more than rate cuts in determining BTC and ETH trajectory in Q1 2026.
The U.S. Federal Reserve delivered three rate cuts in 2025, primarily in Q4, as unemployment edged higher and inflation showed clearer signs of cooling.
Yet, the crypto market reaction defied intuition. Instead of rallying on dovish policy, Bitcoin, Ethereum, and major altcoins sold off, wiping over $1.45 trillion from the total market cap since its October all-time high.
TOTAL crypto market cap monthly chart. Source: TradingView
Let’s examine where central bank policy is headed by March 2026 and its potential impact on the broader crypto market.
Bitcoin, Ethereum could see deeper declines if Fed pauses rate cuts
Despite three consecutive 0.25% rate cuts, most Fed officials, including New York Fed President John Williams, have emphasized inflation risks and data dependency, offering no clear signals on further easing.
“I personally don’t feel an urgent need to take further action on monetary policy right now because I think the rate cuts we’ve already put in place have us in a very good position,” Williams said on Dec. 19, adding:
“I want to see inflation come back to 2% without undue harm to the labor market. It’s a balance.”
Thus, November’s 2.63% CPI should raise the probability of rate cuts in Q1 2026.
However, a record U.S. government shutdown disrupted the Bureau of Labor Statistics’ data collection. Some economists, including Robin Brooks, worry this may have potentially distorted November’s annual inflation reading.
Source: X
This uncertainty helps explain why cryptocurrencies haven’t rallied on the rate cuts themselves over the past few months.
Jeff Mei, COO of crypto exchange BTSE, stated that if the Fed holds rates steady throughout Q1 2026, BTC could fall to $70,000, while ETH might test $2,400.
Fed’s “stealth QE” could stabilize crypto prices
On Dec. 1, the Fed officially ended quantitative tightening, shifting to full rollovers of maturing Treasuries and mortgage-backed securities to prevent further reserve drainage.
Subsequently, the Fed initiated Reserve Management Purchases (RMPs), roughly $40 billion in short-term Treasury bill purchases, to stabilize bank reserves and ease money market pressures. Some analysts have described this move as a form of quantitative easing, or “stealth QE.”
In comparison, during the 2020–2021 QE period, the Fed’s balance sheet grew by about $800 billion monthly, while the total crypto market cap ballooned by over $2.90 trillion.
TOTAL crypto market cap vs. the Fed balance sheet monthly performance chart. Source: TradingView
If RMPs continue at a slower pace into Q1 2026, they could quietly inject liquidity, supporting risk appetite and stabilizing crypto prices without aggressive rate cuts.
“This suggests Bitcoin could climb to $92,000–$98,000, supported by sustained ETF inflows exceeding $50 billion and institutional accumulation,” Mei wrote, adding:
“Ethereum could push toward $3,600, buoyed by recent Layer 2 scaling improvements and restaking yields attracting DeFi users.”
