Recently, many people have been asking: what exactly is the "tapering" that the Fed is doing? Why do Crypto Assets fall as soon as they hear this term? Today, I'll explain it clearly in simple terms.

**Let's start with a plain version**
Quantitative tightening, to put it simply, is the central bank "withdrawing liquidity" — the money that was previously flooded into the market is now being pulled back. This situation for risk assets like Bitcoin is akin to suddenly cutting off the water supply.

**What does the Fed's "ledger" look like?**
We can think of it as a super large vault's ledger.
Left side records assets: mainly a mountain of U.S. Treasury bonds, along with a pile of mortgage-related bonds (professionally known as MBS).
On the right side, liabilities: the US dollar bills circulating all over the street, plus the reserves held at the Fed by various banks.

**How is this ledger inflating?**
Back to the 2008 financial crisis, and later with the outbreak of COVID-19, the economy was on the verge of collapse. The Fed came up with a trump card—quantitative easing (you've definitely heard of the term QE).
The operation is very simple and straightforward: start the printing press (of course, everything is electronic now), create a massive amount of dollars, and then rush to the market to buy bonds madly.
Think about it, the Fed gives money to banks and fund companies, and this money flows into the financial system. The stock market rises, housing prices rise, and Crypto Assets take off too—because there is cheap money everywhere.
Data is more intuitive: the Fed's assets skyrocketed from 900 billion before 2008 to nearly 9 trillion. This rate of expansion is comparable to inflating a balloon.

**Is the "tapering" the opposite?**
That's right. Now inflation pressures are high, and the Fed has started quantitative tightening (QT).
How exactly to do it? The bonds bought before have expired, and no new ones are being purchased. The money just naturally disappears from the market.
It's like a pool; in the past, we were desperately pouring water in, but now we've turned off the faucet and pulled the plug to drain it. The water in the pool (liquidity) is decreasing, and all assets that need "water"—stocks, Crypto Assets—will naturally come under pressure.

This is why the crypto community starts to tremble as soon as they hear "accelerated tapering." With less money in the market, risk assets are the first to suffer.