Quantitative easing (QE) is a monetary policy used by central banks to stimulate the economy when traditional tools, like lowering interest rates, are ineffective. By purchasing government securities, central banks increase the money supply, encouraging banks to lend more and reducing borrowing costs. This process was notably implemented during the 2008 financial crisis and the COVID-19 pandemic, with the US Federal Reserve purchasing trillions in securities to support economic growth. QE can indirectly impact cryptocurrency markets, as increased liquidity often leads to higher prices for assets, including Bitcoin. However, when central banks end QE or begin tightening policy, liquidity decreases, which can negatively affect crypto prices, as seen in 2022. An important distinction exists between QE and quantitative tightening (QT), with the former aimed at economic stimulation and the latter at cooling an overheated economy. While QE can boost growth and lower borrowing costs, its overuse may lead to inflation and asset bubbles, creating long-term economic challenges.

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