The Federal Reserve (the Fed) will inject approximately $6.8 billion in liquidity into the financial markets on December 22, 2025, through repurchase agreements. This is the first liquidity operation of this kind since 2020, with around $38 billion deployed in the past 10 days as part of year-end liquidity management.
This step is a response to liquidity issues at the end of the year and recent adjustments to the Fed's repo facilities. While officials describe these steps as standard procedures, crypto investors see this as a bullish signal for risky assets.
Insight into repo operations and market effects
Repurchase agreements, or repos, are an important tool for daily liquidity management in the financial system. In a repo, the Fed lends money to banks in exchange for high-quality collateral, usually Treasury securities. Banks often repay this money within a day to get their collateral back.
These operations ensure that:
The system has enough cash
Peaks in short-term interest rates are prevented, and
There is less stress on the capital markets.
Activity often increases in December as liquidity tightens.
According to data from the Federal Reserve, the average volume in the daily secured overnight financing rate (SOFR) market was $2.7 trillion in 2025. More than $1 trillion went through repo operations. This underscores the important role of this instrument for market stability.
The operation on December 22 is on the Fed's schedule with a limit of $6.801 billion. This is the first time since 2020 that the Fed is conducting a repo operation that adds liquidity, which distinguishes it from the permanent overnight repo facility that has been in place since 2021.
On December 10, 2025, the New York Fed announced significant changes to its overnight repo operations. The bank eliminated the total limits per transaction and switched to a 'full allocation', where each proposal has a limit of $40 billion. Thanks to these adjustments, the Fed can handle interest and liquidity conditions more flexibly.
No quantitative easing, but still important
Some market participants thought these steps indicated a policy change, but most experts disagree. Repo operations are very different from quantitative easing: in QE, the Fed permanently buys assets and grows its balance sheet, while repos are temporary and self-liquidating.
"Important to know: this is not QE, no money is being printed, and it is not a sign that the Fed is easing its policy, as the money is being repaid. But it does show that liquidity is still tight," said analyst ImNotTheWolf.
This difference is important. QE usually indicates a shift to economic stimulus policy, while repo operations only solve technical issues in the money market. The extra borrowing needs of banks do show that liquidity is tighter.
The timing is also relevant. Around the end of the year, banks need more reserves due to regulations and balance sheet tasks. This can make short-term loans more expensive and increase repo usage.
The Fed also announced Reserve Management Purchases starting from 11 December 2025, amounting to about $40 billion in Treasury bills.
These purchases are intended to keep enough reserves in the system and respond to seasonal liquidity needs. This way, the Fed strengthens its broad approach at the end of the year.
Response from the crypto market and outlook
Despite the explanation that these are standard measures, crypto investors are responding positively to the extra liquidity.
Crypto traders often link more liquidity in the market to a favorable climate for riskier assets. As borrowing becomes easier, more capital can flow into higher-yielding opportunities. In the past, BTC and other cryptocurrencies often rose during such periods of central bank support.
"More cash in the system means easier financing, less stress, and better conditions for risky assets like $BTC & crypto," wrote analyst TheMoneyApe.
Some analysts mention expectations about possible quantitative easing beginning in 2026, but the Fed has not yet reported on this.
At this moment, the central bank continues to focus on a restrictive policy to bring inflation back to 2%.
In the coming weeks, it will become clear whether these repo operations are a one-time year-end occurrence or indicate longer-term liquidity support.
Market researchers continue to closely follow communication and data for hints about policy direction in 2025. For now, the December operations show that the central bank is ready to limit pressure on the funding market while keeping the broader monetary policy unchanged.
