Bitcoin has reclaimed the $85,000 mark after a significant rally, fueled by the Federal Reserve’s declaration to slow down its quantitative tightening (QT) plans. The dovish tilt by the Fed, which analysts are interpreting as an indirect interest rate cut, is seen as a key catalyst for this surge. As of March 19, 2025, Bitcoin’s price was boosted by the Fed’s decision to begin scaling back QT in April, leading to a relief bounce for the cryptocurrency.

Market Reaction to Fed’s Move

The relief rally came after the Federal Reserve’s meeting on March 19, where the Fed’s decision to slow the pace of QT was confirmed. This decision has been perceived by markets as a de facto interest rate cut, which has led to increased liquidity. According to QCP Capital, a crypto options trading desk, the Fed’s dovish stance provided the push Bitcoin needed to surge past $85K.

The impact on the market was immediate, with Bitcoin seeing a sharp increase in price. Analysts believe the slowdown in QT, starting in April, will improve liquidity in the market, particularly in terms of US dollar availability. Jamie Coutts, the chief crypto analyst at Real Vision, noted that the tapering of QT would help reduce volatility in the Treasury markets, which has mirrored the decline in the US dollar index (DXY) earlier this month. This, he believes, is liquidity-positive for Bitcoin and other assets.

What’s Next for Bitcoin?

Despite the relief rally, Bitcoin’s recovery is not yet guaranteed. Arthur Hayes, founder of BitMEX, suggested that Bitcoin might have bottomed out at $77K following the Fed’s actions, but he also warned that stocks could experience more downside risk. He emphasized that Bitcoin’s continued upward movement would depend on future monetary policy actions, particularly a restart of quantitative easing (QE) or a potential exemption in the Supplementary Leverage Ratio (SLR).

From a technical standpoint, Bitcoin’s recovery is still in question. Although Bitcoin has reclaimed key moving averages on the lower timeframes, it is crucial to watch the On-Balance Volume (OBV) indicator, which measures volume flow. A breakthrough above OBV resistance would signal strong upward momentum. However, if OBV fails to clear resistance, it could suggest a lack of volume and indicate that the rally is losing strength.

Crypto trader Income Sharks also pointed out that the market’s strength will depend on how Bitcoin performs at OBV resistance. If Bitcoin’s price encounters rejection at this resistance level, it could weaken the rally and limit further gains.

Options Market Sentiment Shifts

The options market also reflects a shift in sentiment, with call options gaining popularity once again, reversing the bearish positioning from earlier in the year. QCP Capital noted that the options market is a crucial gauge of investor sentiment, and its shift towards bullish positioning has contributed to the recent rally. However, the market is still uncertain, and the true test will come in the coming days as traders reassess the risks.

Bitcoin’s rally could be short-lived if trading volume does not pick up or if market sentiment shifts again. The key test will be the US market open, where a clearer indication of whether the rally will sustain or falter will emerge.

Conclusion

Bitcoin’s surge to $85K is closely tied to the Federal Reserve’s decision to scale back QT, which has improved liquidity and helped boost investor confidence. However, Bitcoin’s future price movement remains uncertain. For the rally to continue, Bitcoin must break through key resistance levels and maintain strong volume. Traders should stay cautious and monitor upcoming market signals to assess whether the rally can be sustained.