Trader Predicts Crypto Rallies Amid Expectations of Fed Monetary Policy Shift – But There’s a Catch

A widely followed crypto analyst is predicting higher prices for crypto assets as he expects the Federal Reserve to end its anti-inflation monetary policies.

In a new thread, the pseudonymous crypto analyst Pentoshi tells his 861,300 followers on the social media platform X that we are close to seeing the end of quantitative tightening (QT), which are policies that reduce the Fed’s balance sheet and lowers the supply of money in circulation.

The trader cites data from the decentralized prediction platform Polymarket, which shows that 100% of users believe that the Fed will end QT by May of this year.

The cessation of QT is typically seen as bullish for risk assets like Bitcoin (BTC) and altcoins as the move signals the end of tight monetary conditions.

However, Pentoshi warns investors to be “cautiously optimistic” as both the S&P 500 and top crypto assets have seen growth over the last few years that appears unsustainable.

“I think we are getting close to [the] end of QT with Polymarket now pricing in odds as a sure thing whereas before they were much lower odds. As previously stated, it does seem Trump would end up forcing it. I don’t think QT automatically means it’s easy mode.

I think that mode is clearly gone overall in the way people think about it (2017/2021). While prices are much lower, I think it’s best to be cautiously optimistic. Many things are down significantly and there hopefully will be some decent mean reversion. Markets in general have rallied hard. And assets were likely a bit overvalued before.

SPX going 25% back to back years was going to have low growth or negative this year as it wasn’t a sustainable pace. BTC went from $16,000 to $108,000, SOL [from] $8 to $300. Cautiously optimistic. [Be] patient for any time capitulation, as often, following big trends, we eventually get longer sideways periods and less volatility as the market finds balance.”

While Pentoshi is flipping tactically bullish on stocks and crypto, he warns investors that any rally will likely be short-lived.

“I think any up currently will be a lower high. People underestimate the time aspect.”

At time of writing, Bitcoin is trading for $83,248.

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