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The Federal Reserve (Fed) pumped $16 billion into the US banking system on December 30, marking the second largest liquidity operation since the Covid-19 crisis. These funds were provided through overnight repurchase agreements (repos), pushing the total value of Treasury securities purchased via repos in December to $40.32 billion.
The scale of this intervention has reignited the debate about the hidden pressures in short-term financial markets, and what the growing global liquidity ultimately means for risk assets, including Bitcoin.
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High liquidity in December indicates growing pressure under record global liquidity
According to Parshart, the operation of December 30 ranked just behind the emergency measures of the pandemic era in size.
Financial commentator Andrew Lookenauth echoed this concern, Pointing This large injection indicates that “all is well” only on the surface. In a separate post, Lookinoth compared the situation to banks pledging assets they don’t fully control.
to argue Institutions now need liquidity to cover liabilities related to commodities and collateral contracts.
The Federal Reserve’s overnight redemption service allows eligible parties to exchange Treasury securities for cash at a fixed rate. This allows the central bank to maintain control over short-term interest rates.
while The Federal Reserve typically uses redemptions Reserves Around the end of the quarter and the end of the year, the total of $ 40.32 billion in December stands out significantly. Bluekurtic Market Insights described the activity as a continuous “increase in liquidity”, highlighting that demand remained high throughout the month.
The general view is that the increase reflects year-end budget constraints rather than an outright crisis. Banks face stricter regulatory requirements in reporting periods, which often reduces their willingness to lend in private redemption markets.
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When this happens, institutions turn to the Federal Reserve for support. However, continued reliance on central bank facilities is often interpreted as a sign of fundamental pressures or risk aversion among counterparties.
Away from the stores, attention turned to the minutes of the recent meeting of the Federal Open Market Committee. Markets & Mayhem analysts highlighted what they called the most significant takeaway: the Federal Reserve’s so-called “non-quantitative easing” program could include buying up to $220 billion in treasury bonds over the next 12 months to ensure adequate reserves in the banking system.
Politicians emphasized that these purchases are only intended to control prices and manage liquidity, and not as a signal of monetary easing.
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Higher interest rates for more clash with record global liquidity as Bitcoin stalls
The minutes of the Federal Open Market Committee also revealed a cautious political outlook. Most participants thought that interest rate cuts would only be approved if inflation continued to fall as expected. Many have warned that an early cut could drag down inflation or undermine the Fed’s credibility.
As a result, markets have pushed expectations of the next rate hike to at least March 2026, reinforcing the “higher for more” narrative even as liquidity expands.
At the same time, global liquidity reached a new record. Data shared by Alpha Extract indicates that global liquidity has increased by approximately $490 billion. Support is derived from:
- improve lateral conditions,
- Financial flows that resemble a hidden quantitative easing, and
- Coordinated settlement among major economies.
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China typically starts the year with an increase in liquidity, while regulatory changes related to bank treasury quotas in the West are also expected to ease restrictions.
Based on their conclusions, cryptocurrency commentators argue that “global liquidity is accelerating” and that Bitcoin will eventually follow. Historically, The expansion of global liquidity coincided with strong performance in risk assetsincluding digital currencies.
However, market reaction has been subdued so far. Bitcoin continues to trade in a narrow range between around $85,000 and $90,000, with low volume and low volatility.
This disconnect may reflect the complexity of the current cycle, as abundant liquidity collides with restrictive policy rates, regulatory uncertainty and continued caution after a volatile year.
Will the increase in liquidity in December be a turning point? The Federal Reserve is quietly adding support under the financial system, although it insists that the system is not going away. However, the direction of the liquidity moment may be more important than the labels associated with it.
