TLDR:
- The Fed’s quantitative easing shift redirects MBS outflows to Treasuries, altering liquidity flows.
- About $7 billion in MBS maturities last week sets a baseline for monthly reinvestments.
- Redirected demand can facilitate Treasury yields and free up institutional liquidity for other assets.
- Crypto markets follow liquidity rotations closely due to their influence on trading conditions.
The The Federal Reserve’s plan Ending quantitative easing on December 1, 2025 introduces a major shift for global markets. The move follows a balance sheet reduction that began after the pandemic’s expansion peaked in 2022.
The Fed grew its holdings to about $8.9 trillion during the crisis response, then reduced that number to about $6.5 trillion by the end of November 2025. The new phase now changes how outflows from mortgage-backed securities will be handled.
Quantitative tightening pivot redirects Fed Balance Sheet flows
The transition marks a break from the standard QT approach that has ruled in recent years. Under that framework, the Fed allowed Treasuries, MBS and other assets to expire without reinvestment.
Data shared by Thorsten Froehlich show the central bank held about $4.2 trillion in Treasuries and $2.2 trillion in MBS before the month’s shift. The new policy redirects principal payments from maturing MBS to new government purchases.
This change does not recreate the pandemic wave of bond buying. It introduces a directed flow that increases the demand for United States national debt while reducing MBS exposure.
The increased competition in the government bond market may reduce pressure on interest rates and absorb supply during the coming issuance cycle. That redirection also frees up liquidity that institutional investors can use in other assets, including crypto.
Data referenced in Froehlich’s post noted that roughly $7 billion in MBS matured between November 17 and 26. Using that range as a guide, the monthly total could reach about $30 billion.
Market players are now seeing how this recurring flow affects government pricing until December. The structure is similar to synthetic relief rather than full quantitative stimulation.
Liquidity redistribution creates new market dynamics
The policy shift comes during a period of increasing demand for alternative assets.
Crypto markets often react to changes in liquidity conditions, especially when Treasury yields start to cool down. Investors follow these developments as changes in dollar liquidity can affect trading volumes and risk appetite. A more stable financial market may also decrease financing load over leverage positions.
Analysts following the Fed’s balance sheet path expect the December adjustment to affect capital allocation across markets. The mechanics are different from QE, but the effect still increases the rate of cash recycling within the system.
The market desk is preparing for the first reinvestment flows to appear at the beginning of the month. Crypto traders are watching for short-term changes in sentiment tied to this renewed liquidity channel.
The full impact will depend on how consistently the Fed redirects MBS outflows in the months after December. Early flows will drive expectations for 2026 positioning. The market is now approaching the change with attention to Treasury demand, liquidity rotation and trading conditions across digital assets.
