Key conclusions: :

• Fed holds could put pressure on cryptocurrencies, but ‘hidden QE’ could mitigate downside risks.

• Liquidity matters more than cuts, shaping the direction of BTC and ETH in the first quarter of 2026.

The US Federal Reserve cut interest rates three times in 2025, mainly in the last quarter, as unemployment rose and inflation showed clearer signs of cooling.

However, cryptocurrency markets reacted counterintuitively. Instead of focusing on dovish politics, Bitcoin (BTC), Ether (ETH), and major altcoins have been sold off, with total market capitalization falling by over $1.45 trillion from its record high in October.

Let’s take a look at how central bank policy may play out in March 2026 and its potential impact on the broader cryptocurrency market.

Bitcoin and Ether could fall further if Fed pauses interest rate cuts

Despite three consecutive 0.25% rate cuts, most Fed officials, including Novel York President John Williams, accented risks of inflation and data dependence, without giving clear signals of further easing.

“I personally don’t feel an urgent need to take further action on monetary policy because I think the cuts we’ve made have put us in a really good position,” Williams said on December 19, adding:

“I want inflation to fall to 2% without causing undue damage to the labor market. This is a balancing act.”

As a result, November’s CPI of 2.63% should escalate the chances of rate cuts in the first quarter of 2026.

Still, the record U.S. government shutdown disrupted data collection by the Bureau of Labor Statistics. Some economists, including Robin Brookswas concerned that this could potentially distort November’s annual inflation readings.

This uncertainty helps explain why the cryptocurrency has not appreciated in recent months as a result of the cuts themselves.

Jeff Mei, chief operating officer of the BTSE cryptocurrency exchange, he said BTC could fall to $70,000 and ETH could fall as low as $2,400 if the Fed keeps interest rates steady throughout the first quarter of 2026.

Related: Bitcoin fluctuation worth 70 thousand dollars would reset the cycle rather than confirm a up-to-date bear market: analyst

Fed’s ‘hidden QE’ could stabilize cryptocurrency prices

On December 1, the Federal Reserve formally ended quantitative tightening by moving to a full rollover of maturing Treasuries and mortgage-backed securities to stop further reserve drains.

It then launched reserve management purchases (RMPs), worth about $40 billion of short-term purchases of Treasury bills, to stabilize bank reserves and ease money market tensions, which some analysts refer to as a form of quantitative easing or “stealth QE.”

For comparison, the Fed’s balance sheet grew by approximately $800 billion every month during QE in 2020-2021, a period during which cryptocurrency market capitalization increased by more than $2.90 trillion.

If RMPs continue at a slower pace in Q1 2026, they could quietly inject liquidity into the market, supporting risk appetite and stabilizing cryptocurrency prices, even without aggressive interest rate cuts.

“This means Bitcoin could rise to $92,000-98,000, supported by continued inflows into ETFs exceeding $50 billion and institutional accumulation,” Mei wrote, adding:

“Ethereum could surge towards $3,600, benefiting from recent improvements in Layer 2 scaling and yield repurposing that are attracting DeFi users.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision. While we strive to provide exact and up-to-date information, Cointelegraph does not guarantee the accuracy, completeness or reliability of any information contained in this article. This article may contain forward-looking statements that involve risks and uncertainties. Cointelegraph is not liable for any loss or damage arising from your reliance on this information.