The crypto market is becoming vibrant with a capitalization increase to US$2.94 trillion, and Bitcoin slightly recovering to a price of US$87,000. The fear and greed index also rose to level 16, as reported by CoinMarketCap on Tuesday (02/12).
The catalyst for this increase occurred after The Federal Reserve (The Fed) ended Quantitative Tightening (QT), a monetary policy of the central bank that reduces M2 or the money supply, amounting to US$6.57 trillion to curb inflation and enhance US liquidity.
In other words, this central bank monetary policy is expected to push the money supply higher than before. This policy has been in effect since the COVID-19 pandemic to curb inflation and attract liquidity circulating in the market.
Furthermore, the Overnight Reverse Repo facility, which previously absorbed excess cash of US$2.5 trillion, has decreased to nearly zero, thus removing liquidity constraints. The balance sheet freeze and the addition of US$13 billion to US banks by the Fed are also said to support stocks, bonds, and crypto digital assets.
