Fed injects $6.8 billion into market in first repo since 2020 — Why cryptocurrencies are gaining attention

The US Federal Reserve (Fed) plans to inject approximately $6.8 billion into financial markets through repurchase contracts on December 22, 2025. This is the first liquidity operation of its kind since 2020, with approximately $38 billion deployed over the past 10 days as part of year-end liquidity management.

The move was made in response to the year-end liquidity crunch and recent adjustments to the Fed’s standing repo facility. Although officials describe these steps as routine, crypto investors see them as a bullish signal for risk assets.

Understand repo operations and market impact

Repurchase agreements (repos) are a central tool for managing liquidity in the financial system on a day-to-day basis. In a repo, the Fed lends cash to banks backed by high-quality collateral (usually Treasury securities). Banks quickly pay back the cash to recover the assets, often within a day.

These operations:

• keep the system supplied with enough cash
• Preventing short-term interest rates from rising,
• Reduce capital market stress.

Activity often increases in late December as liquidity becomes tighter.

According to data from the Federal Reserve Board, daily trading volume in the securities overnight financing rate (SOFR) market averaged $2.7 trillion in 2025, of which more than $1 trillion was conducted through repurchase operations. This reflects the important role these tools play in market stability.

The Dec. 22 operation is on the Fed’s schedule and has a cap of $6.801 billion. Uniquely, this is the Fed’s first additional liquidity repo operation since 2020, and is distinct from the permanent overnight repo facility established in 2021.

On December 10, 2025, the New York Fed announced notable updates regarding its overnight repo operations. The bank removed aggregate trading limits and moved to a full allocation framework with each proposal capped at $40 billion. These changes will give the Fed more flexibility in managing interest rate and liquidity conditions.

Not quantitative easing, but still important

Some market participants have speculated that the move signals a change in policy, but most experts disagree. Repo operations are very different from quantitative easing. Quantitative easing involves permanent asset purchases that expand the Fed’s balance sheet, while repo operations are temporary and self-correcting.

“Importantly, this is not quantitative easing, it’s not printing money, it’s not a signal of easy Fed policy because the cash is being paid back, but it certainly shows that liquidity is still a little tight,” said analyst Imnot Zawolf.

This distinction is extremely important. Quantitative easing typically reflects a shift toward economic stimulus, whereas repo operations simply target technical problems in money markets. Still, increased demand for bank reserve borrowing suggests tighter liquidity conditions.

Timing is also important. At the end of the year, banks face increased demand for reserves to meet regulatory requirements and manage their balance sheets. This could increase short-term funding costs and increase the use of repos.

The Fed also announced reserve purchases of Treasury bills totaling approximately $40 billion starting December 11, 2025.

These are designed to maintain sufficient system reserves, address seasonal liquidity needs, and strengthen the Fed’s multifaceted year-end approach.

Virtual currency market reaction and future outlook

Despite the mundane explanations, crypto investors are reacting positively to the injection of liquidity.

Crypto traders often associate increased market liquidity with a favorable environment for risk-on assets. When borrowing becomes easier, capital can be moved to higher-yielding opportunities. Historically, BTC and other cryptocurrencies have rallied during periods like this when there was support from central banks.

Analyst TheMoneyApe wrote: “More cash inflows into the system means easier funding, less stress, and better conditions for risky assets like BTC and cryptocurrencies.”

Some analysts have talked about the possibility of quantitative easing in early 2026, but the Fed has not issued any such statement.

Currently, the central bank remains focused on maintaining restrictive policies in order to bring the inflation rate back to the 2% level.

The coming weeks will reveal whether these repo operations are an isolated year-end event or a sign of more permanent liquidity support.

Market watchers will closely monitor communications and data for clues about policy direction in 2025. So far, December’s operations suggest that the central bank is prepared to avoid funding market tensions while keeping broad monetary policy stable.

The post Fed Injects $6.8 Billion into the Market in First Repo Since 2020 — Why Cryptocurrency is in the spotlight appeared first on BeInCrypto.