Recently, many people have been asking about the impact of central bank policies on the market, so I thought I’d organize my thoughts. Basically, QE and QT are two extreme tools used by central banks to regulate the economy.

Quantitative easing, or QE, involves the central bank buying large amounts of assets like government bonds, effectively injecting money directly into the market. This action quickly boosts liquidity, lowers borrowing costs, and makes businesses and individuals more willing to borrow and invest, which naturally pushes up stock prices and asset values. That’s why every time QE is implemented, the market tends to experience a rally.

Conversely, quantitative tightening, or QT, involves the central bank selling assets or reducing reinvestments, gradually decreasing the money supply in the market. Interest rates rise accordingly, borrowing becomes more expensive, and investment enthusiasm cools off, often putting downward pressure on asset prices.

The Federal Reserve’s recent operations are quite interesting. Since 2022, they’ve been tightening for about four years, putting significant pressure on the market. But since September last year, the tone suddenly shifted— the Fed started cutting interest rates and has now initiated a new round of QE. This shift is definitely a bullish signal for the market, which explains why so many people are feeling optimistic lately.

In simple terms, QE means more money, lower interest rates, and easier asset appreciation; QT means less money, higher interest rates, and downward pressure on assets. Now that the Fed has shifted from tightening to easing, this turning point will have a profound impact on both crypto markets and traditional assets. Those interested can follow the performance of related assets on Gate.