"The Fed is expanding its balance sheet, so Bitcoin will rise"—that statement is only half right. If the expansion is genuine "money printing," it is indeed bullish. But if it is just a "fake move," jumping in will likely leave you disappointed.
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The core issue is this: the Fed's balance sheet expansion comes in two forms, and only one counts as real "money printing."
Technical Expansion Is Not Money Printing
In December 2025, the Fed announced the end of quantitative tightening and launched Reserve Management Purchases (RMP), buying about $40 billion in short-term Treasury bills each month. The market cheered, saying "QE is here," but Shenwan Hongyuan immediately poured cold water on the idea: this is not QE; it is the end of the QE era.
What is the difference? The purpose of QE is to push down long-term interest rates and actively ease policy—it signals a shift in the policy stance. RMP, by contrast, is a technical operation to maintain sufficient reserves and keep the money market functioning normally. It has nothing to do with whether monetary policy is loose or tight.
The Fed did the same thing in 2019—over-tightening caused repo market rates to spike, forcing the central bank to expand its balance sheet as a rescue measure. At the time, officials repeatedly stressed that "this is not QE."
Why does this distinction matter? During QE, balance sheet expansion is essentially handing out money, and liquidity spills directly from the central bank into risk assets. With technical expansion, the money merely fills the holes in bank reserves and the overnight repo market. It never reaches Bitcoin.
Real Quantitative Easing Is Not Happening Right Now
Real QE requires interest rates to have already fallen to zero and the rate-cut toolbox to be exhausted, forcing the central bank to use balance sheet expansion to suppress long-term rates. That was the script in 2008 and 2020.
Today, the policy rate is still at 3.50%–3.75%, nowhere near zero. If the Fed truly wanted to ease, it could simply cut rates—there is no need for QE. Shenwan Hongyuan clearly points out that the precondition for QE is a zero interest rate, and the Fed will not restart QE until rates return to zero.
Three Indicators to Judge the Nature of the Current Expansion
What is being purchased. Buying short-term Treasury bills (T-bills) means technical expansion; buying long-term Treasuries and MBS means QE. RMP explicitly only buys T-bills with maturities under one year, which is a typical feature of a technical operation.
Whether rates are at zero. If the policy rate has not reached zero, QE is impossible. At the current level above 3.5%, there is still plenty of room to cut rates.
Whether reserves are "sufficient". RMP was launched because bank reserves had fallen to "slightly above ample" levels, and continued balance sheet reduction would trigger a money market crisis. This is "filling a gap," not "flooding the system."
High-risk warning: After taking office, new Fed Chair Kevin Warsh established an independent working group to comprehensively review the "ample reserves framework." If the working group recommends further balance sheet reduction or a framework overhaul, the current technical expansion could be reversed in some form in 2026. Whether the expansion is bullish or bearish depends on whether it can be sustained.
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How to Verify in Practice
Check FRED data and look at changes in the Fed's total assets. If the balance sheet stays around $6.7 trillion without a sharp jump, the expansion is limited in strength.
Look at whether the Fed is buying short-term or long-term Treasuries—the former is a technical operation, while the latter could be QE.
Watch for the Warsh working group's mid-2026 report. If the report recommends maintaining the current size, that is bullish for markets. If it recommends gradual balance sheet reduction, expectations of improving liquidity will need to be reassessed.
