Fed's Liquidity Injection Strategy
The Federal Reserve is planning a liquidity injection through bill purchases starting tomorrow, which will increase the money supply and often boost risk assets. The US Fed is set to add $8.3 billion in capital to support economic stability.
While short-term effects may vary, the decision to add liquidity is widely seen as super bullish in the long term, especially for risk assets like crypto and tech stocks.
Such a significant injection by the FED is also a signal that the central bank is committed to supporting financial markets amid ongoing global uncertainties. For crypto investors, this often translates into increased confidence and stronger price action over time.
Data also shows that the Fed will add $53.3 billion in liquidity by February 12 via bond reinvestments and reserve buys.
Impact of Increased Liquidity
More liquidity can translate to calmer credit markets, lower pressure on short-term interest rates, and a supportive backdrop for both equities and bonds.
Liquidity's Positive Effect on Crypto
When the FED adds money into the system, it increases market liquidity, reduces borrowing costs, and encourages risk-taking among investors. This has historically led to higher equity and crypto prices, greater demand for scarce assets like Bitcoin, and stronger overall investor sentiment.
Crypto most thrives in high-liquidity environments, which may push the market towards a rally as capital trickles down from traditional finance.
Current Crypto Market Conditions
Despite hopes of renewed momentum from shifts in the macroeconomic environment, the crypto market is currently in a sustained decline. In the last 24 hours, the crypto market has lost more than $50 million, dropping to a market capitalization of around $3.17 trillion as BTC plunged below $91,000.
This drop has resulted in massive liquidations in the market, totaling over $2 billion in the last 2 days and about $260 million in the last 24 hours, according to Coinglass data.
Key Market Developments
Total $55.3B liquidity added by Feb 12 via bond reinvestments & reserve buys.
QE SHOULD START SOONER NOW! pic.twitter.com/UqDRgIAttc— Money Ape (@TheMoneyApe) January 19, 2026