Why the Crypto Market Isn’t Rallying Despite the Fed’s $37 Billion Liquidity Injection
The Federal Reserve has injected an estimated $37 billion into the US banking system since final Friday.
Despite this inflow of capital, investor sentiment in cryptocurrency markets has plunged to ranges of utmost concern. Major belongings are posting sharp declines, and the sector’s whole capitalization has slipped 6.11% this month.
Liquidity In, Prices Down: The Fed–Crypto Disconnect Explained
According to the newest information, on November 3, the Federal Reserve carried out a further $7.75 billion in repo operations. The transfer got here shortly after the Fed added $29.4 billion to the banking system on Friday.
This marked the largest single-day liquidity enhance since the dot-com period. In addition, the whole liquidity injections have amounted to round $37 billion.
“This is the greatest cash printing occasion of the final 5 years. The crypto market is about to go parabolic,” Alex Mason wrote.
In addition to Treasuries, the Fed additionally injected $14.25 billion in liquidity by repo operations backed by mortgage-backed securities that very same day.
When the Federal Reserve injects liquidity, it means there’s more cash circulating in the monetary system. Banks and establishments now have further capital to deploy, which may move into riskier belongings, corresponding to shares and cryptocurrencies. In concept, this further liquidity helps costs.
“Everyone is asking bear market at the worst doable time. Global liquidity is about to ramp: Fed repo inflows, TGA floodgates, Asia stimulus wave, Credit easing coming. This whole cycle ran on no liquidity. That’s why solely Bitcoin made new highs. When liquidity returns, altcoins transfer. The macro setup is loaded,” Merlijn The Trader remarked.
Yet regardless of the latest liquidity enhance, crypto markets have but to learn. In truth, sentiment has turned sharply detrimental.
The Crypto Fear and Greed Index has dropped to 21, signaling “Extreme Fear.” This marks the lowest studying since April 2025, down from a impartial 50 only a week earlier.
Furthermore, asset costs are additionally down. Bitcoin (BTC) has declined by nearly 5% to this point in November, whereas Ethereum (ETH) has dropped by nearly 9% over the similar interval.
This disconnect might stem from the Fed’s reverse repo operations. According to the newest information, the central financial institution has carried out over $75 billion in reverse repos since final Friday — together with almost $24 billion on November 3 alone.
Unlike repo operations, which inject liquidity into the monetary system, reverse repos drain money. In these transactions, the Fed borrows cash from banks and money-market funds in change for Treasuries as collateral. This successfully pulls liquidity out of circulation, tightening short-term funding situations.
The sharp rise in reverse repo utilization means that monetary establishments are in search of security and parking extra money with the Fed as an alternative of deploying it in the market. The blended alerts, injections by repos however simultaneous liquidity absorption by reverse repos, spotlight uncertainty in the monetary system.
For threat belongings like crypto, this push-and-pull dynamic helps clarify why markets stay unstable: regardless of contemporary liquidity inflows, total situations nonetheless really feel tight, maintaining investor sentiment on edge.
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