Family! Tonight, don't wander around aimlessly. Keep an eye on the 'printing press switch' at 10 PM Beijing time— the Federal Reserve is going to pump money into the market again! $6.8 billion, not too much, not too little, but this is the Nth wave of 'feeding' in 10 days. When calculated, that's a total of $38 billion in 10 days. Is this year-end 'liquidity' the lifeline for the crypto space, or just a false alarm? As someone who has been watching the Federal Reserve's actions for 8 years, I’m here to share my insights with you today—it's all valuable information. Understand this and avoid taking 3 months of detours!
Don't be in a hurry to shout 'good news is here'; we need to first understand the core of the Federal Reserve's actions this time—the repurchase agreement. Simply put, this is the Federal Reserve's 'liquidity emergency package.' In simple terms, the Federal Reserve first buys quality assets like government bonds and MBS from the market, providing cash to banks and investment firms; after a few days, these institutions will redeem the assets and pay some interest to the Federal Reserve. It’s not that kind of unlimited 'flooding the market'; it's more like giving the financial system a 'top-up' at the end of the year to prevent banks from running out of money and causing the market to freeze.
But the key point is coming! Why is this operation exciting the crypto circle? Because the crypto market is essentially a part of risk assets; money votes with its feet. The pattern over the past few years is very clear: whenever the Federal Reserve relaxes liquidity, the 'hot money' in the market will look for high-yield targets everywhere. The crypto market, as a representative of high volatility and high returns, often gets a share of the pie. Especially since the market has been in a bottoming phase recently, everyone is waiting for a clear signal. The Federal Reserve's operation of 38 billion over the past 10 days has just given the market an imaginative space for 'policy easing.'
However, old fans know that I never sing a one-sided market; here I must pour a bucket of cold water: this operation does not equal a new round of massive liquidity increase. The Federal Reserve itself has stated that this is a routine operation for 'year-end liquidity management,' which happens every year at the end of the year with the aim of smoothly getting through the tight funding period at the end of the year, not because the economy is failing and needs saving. Moreover, in terms of scale, 38 billion spread over 10 days averages 3.8 billion per day, which is trivial compared to the thousands of billions of quantitative easing in 2020. So don't expect this wave to directly lift the market; it is more likely to add a layer of 'buffer' to the bottoming market, reducing the possibility of a big drop.
Let's talk about my practical views: In the short term, after tonight's 6.8 billion landing, the market may have a wave of emotional small rebounds, after all, the liquidity has loosened a bit, and short sellers will be slightly restrained. But in the medium term, the key is still to watch the Federal Reserve's interest rate decision in January, as this will be the core determinant of the subsequent liquidity direction. If a rate cut signal is released in January, the spring of the crypto circle may really be coming; if it maintains high interest rates, then after this wave of 'water replenishment,' the market will still have to bottom out.
So in terms of operations, I suggest everyone not to chase highs. Those who have chips can reduce positions slightly during the rebound to lower costs; those without chips should continue to wait and see for a clearer signal, and not be misled by short-term emotions. Remember, the crypto market is always full of opportunities; what's lacking is a clear mind in the chaos.
Lastly, speaking from the heart, old fans who have followed me for so long know that I never deal in empty talk; I say what I mean and lay out the most core logic and operational thoughts every time. After the Federal Reserve's operation lands tonight, I will update the commentary section with interpretations and analyze the signals behind the market reactions as soon as possible. Brothers who haven't clicked follow quickly do so, otherwise, when the market moves, you might not be able to find my valuable insights! Follow me @链上标哥 , so you won’t get lost!
