Tonight's performance by the Federal Reserve is not about interest rate cuts, but whether it will turn on the faucet it holds! The Federal Reserve officially ended quantitative tightening (QT) on December 1. Now, bank reserves have dropped to levels seen during periods of financial stress, with rates even hitting the policy rate ceiling of #SOFR periodically. This indicates that the U.S. banking system is slowly entering a state of liquidity stress!

💸 The real highlight: the balance sheet is set to expand! A 25 basis point rate cut is no longer the main attraction. The most important signal from the Federal Reserve will be the direction of its balance sheet strategy.

The Federal Reserve is expected to clearly outline how it will transition to a reserve management purchasing program. This essentially means easing liquidity in a disguised manner.

#EvercoreISI predicts that this program could start as early as January 2026. It is expected to inject about $35 billion per month for the purchase of treasury bills, resulting in an annual growth of the balance sheet exceeding $400 billion.

U.S. banks predict that the Federal Reserve will announce a reserve management bond-buying program of about $45 billion per month at the end of this week’s meeting.

⚙️ Why must liquidity be injected? Federal Reserve Governor Waller stated that this move is crucial for maintaining order in the repurchase market and ensuring smooth transmission of Federal Reserve monetary policy. In simple terms, without liquidity injection, the system will jam!

From my personal perspective, liquidity injection is a hard necessity, the banking system is already short on liquidity, and the Federal Reserve's balance sheet expansion is not a matter of choice but a requirement! Whether it's $35 billion or $45 billion, the shift in liquidity has become a foregone conclusion. What to watch tonight? Don't just focus on interest rate cuts; pay close attention to the description of the start time and monthly scale of the #RMP plan in the implementation statement. This is the key signal determining whether $BTC can break through the $96,000 barrier.