How should the crypto market share this Christmas gift?
The authorities say 'routine operation' but their actions tell a different story. This $38 billion year-end liquidity is like a timely rain falling on the dry soil of the market.
Last night at 10 PM, the Federal Reserve conducted another repurchase operation, injecting $6.8 billion in liquidity into the market. This is already the third similar operation in the past 10 days, with a cumulative injection scale approaching $38 billion.
Although the authorities emphasize that this is just a routine year-end liquidity management, the market has long tacitly regarded it as a short-term benefit.
As a crypto analyst who has gone through multiple bull and bear cycles, I repeatedly tell my fans: never go against the Federal Reserve, especially when it starts to 'quietly send warmth.'
01 What seems like 'routine' actually has deep meaning.
Looking back at the $38 billion liquidity injection, it coincides with the time when financial institutions are most in need of money at year-end. The Federal Reserve's move aims to smooth interest rate fluctuations and maintain financial system stability.
It's like at a grand party, where the Federal Reserve ensures that the glasses are never empty, but also won't let you get drunk to the point of oblivion.
Unlike quantitative easing, these repurchase operations are ultra-short-term tools and do not increase the base currency. Some analysts vividly liken them to 'year-end subsidies for financial institutions' rather than long-term 'flooding.'
But why is the market so excited? Because in the current environment, investors are highly sensitive to liquidity signals. In the complex macro background where the Federal Reserve just cut rates by 25 basis points in December while the Bank of Japan raised rates to 0.75%, any liquidity injection will be interpreted as positive for risk assets.
02 How does the liquidity big package affect the crypto market?
From historical patterns, when the Federal Reserve's liquidity is relatively loose, Bitcoin and altcoins are more likely to rise. An increase in U.S. dollar liquidity often overflows into risk assets.
The current crypto market is completely different from three years ago. With the passage of Bitcoin spot ETFs, the channel for traditional capital to enter the crypto market has become smoother.
This means that the liquidity released by the Federal Reserve could very well flow into the crypto market indirectly through institutional channels.
Different cryptocurrencies have varying sensitivities to liquidity. Altcoins, which are most sensitive to liquidity, will become the first choice for short-term speculative rebounds. In contrast, large-cap assets like BTC and ETH may not respond obviously to such small-scale operations.
03 My personal opinion: optimistic in the short term, but still need to look at the fundamentals in the long term.
From a purely technical analysis perspective, the market is currently at a key juncture. Taking SOL as an example, its 4-hour chart shows that MACD has formed a 'golden cross underwater' below the 0 axis, which is a technical signal of weakening bearish momentum.
In terms of key positions, $135 is an important resistance level. If it can effectively break through and stabilize, it will further open up upward space. Meanwhile, $123 is a significant support level recently.
Considering the macro background of short-term liquidity improvement and some technical indicators showing a slowdown in downward momentum, market sentiment may tend to be optimistic in the short term.
But I want to remind you that this operation is just a year-end temporary 'subsidy' and does not represent a shift in monetary policy. A real bull market still needs to wait for more comprehensive easing policies.
04 How should ordinary investors operate?
For holders, it is recommended to set stop-losses and closely monitor the breakthrough of key positions. For example, if SOL can stabilize above $127, a short-term bullish pattern may form.
For those who are flat, there is no need to rush to chase high prices. The market is never short of opportunities, but your capital is limited. It is advisable to wait for a confirmation of a breakthrough at key resistance levels before entering with a small position.
For all investors, it is necessary to be wary of the risk of 'buying expectations and selling facts.' If the market has already risen in advance, it may fall back when the news lands due to the exhaustion of positive factors.
My personal strategy is to view this liquidity injection as a short-term trading opportunity rather than a trend reversal signal. Before a clear directional confirmation signal appears at key positions, it is advisable to regard the current market as still in a range-bound phase.
Looking globally, the Bank of Japan has raised rates to 0.75% (a 30-year high), the Bank of England has cut rates to 3.75%, while the European Central Bank has remained unchanged. Global monetary policy is moving towards differentiation, and this action by the Federal Reserve is just a small episode at year-end.
The real macro trend will not become clear until next spring, at which point we will see whether the Federal Reserve will continue to cut rates or pause due to stubborn inflation.
The market is always looking for certainty in uncertainty. This year-end 'red envelope' from the Federal Reserve is more like a Christmas gift prepared for savvy traders. Are you ready to unwrap it?
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