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What we will cover this week:

Recent macro signals point toward a critical policy inflection: the Federal Reserve is preparing to end Quantitative Tightening (QT) as labor data softens and inflation stabilizes. This shift toward liquidity support mirrors conditions that have historically marked strong uptrends in risk assets - particularly crypto.

Federal Reserve Chair Jerome Powell’s October 14th speech confirmed growing concern over employment softness despite stable inflation. While the CPI remains around 3.0%, Powell emphasized that price pressures are largely tariff-driven, not systemic. This marks a notable shift: for the first time since 2021, the Fed’s primary concern has moved from inflation control to preserving labor market strength. With payroll growth slowing and participation declining, the Fed is signaling that additional liquidity tightening could destabilize employment - setting the stage for an official end to QT.

Since QT began in 2022, the Fed’s balance sheet has contracted by over $2.2 trillion, reducing reserves across the banking system. Powell’s reference to “ample reserve conditions” suggests reserves are nearing critical levels. When reserves fall too low, banks hoard cash, repo rates spike, and the Fed loses control over short-term funding markets.

The near-zero Reverse Repo (RRP) balance reinforces this point. As institutions chase higher yields in short-term Treasury bills, the Fed’s control over overnight rates has weakened. Ending QT now would restore reserve stability and prevent further tightening of short-term liquidity.

Two macro levers - interest rates and the Fed balance sheet - are now tilting dovish. Rate cuts are expected within months, and balance sheet runoff is likely to stop entirely. Together, these moves represent the transition into a new liquidity phase. Historically, this backdrop has preceded strong risk-on rallies across equities, gold, and digital assets.

Investors who built cash positions during QT are beginning to reallocate, while those already positioned in the market are holding through minor corrections.

Crypto markets, highly sensitive to liquidity cycles, are positioned to benefit from this shift. The end of QT reduces systemic liquidity stress and restores market risk appetite. If the Fed follows through with 2–3 rate cuts by year-end, Bitcoin and Ethereum are likely to regain upside momentum after months of consolidation.

While near-term volatility is possible as markets digest the policy pivot, improving liquidity conditions form the base of the next expansion phase in digital assets.

Top Narrative Gainers In The Last 7 Days:

With such backing, x402 could attract significant capital inflows from other chains - positioning itself as a strong competitor to BNB Chain.

Projects like Four Meme are introducing new features to ride the latest trends, creating more opportunities for both creators and investors.

Takeaways:

Read more: AI Agent Economy (x402 Payment Rails) Narrative

Our radar expanding on these ecosystems:

Full news roundups for the week from October 20th - October 26th: Here

This week’s watchlist highlights notable projects we believe are worth monitoring, chosen for their strong fundamentals and key upcoming catalysts.

Full list: Projects to Watch (October 20th - October 26th)