U.S. Fed supplies $38 billion in liquidity over 10 days…Could it act as a catalyst for a crypto market rebound?

The U.S. central bank, the Federal Reserve (Fed), is expanding short-term liquidity provision to stabilize financial markets. With large sums injected into the market over the past 10 days, attention is focused on whether this will also affect the crypto market.

On the 22nd (local time), Cointelegraph reported, "The Fed is scheduled to supply an additional $6.8 billion in liquidity just this week, and the cumulative liquidity injection over the past 10 days amounts to $38 billion." This is mainly done by supplying short-term funds to the banking system through repurchase agreement (repo) operations.

The Fed's repo liquidity supply is interpreted as a measure to ease short-term funding strains in financial markets and to curb interest rate volatility. In particular, as it coincides with a period when financial institutions' demand for liquidity increases ahead of year-end, it is being viewed as a signal of market stabilization.

Markets are concentrating on whether this liquidity expansion could stimulate risk-on sentiment. Conventionally, when dollar liquidity increases, a favorable environment for risk assets such as stocks and crypto assets has been created. However, recent structural factors in the crypto market — such as deleveraging and macro uncertainty — are also at play, so it is uncertain whether this will lead to an immediate rebound.