The Federal Reserve Board (FRB) plans to supply approximately $68 billion to the financial markets through repo transactions on December 22, 2025. This will be the first liquidity supply operation since 2020, and approximately $38 billion in liquidity management has been implemented over the past 10 days.
This measure is a response to the liquidity crunch at the end of the year and the recent adjustments to the Federal Reserve's standing repo facility. Federal Reserve officials describe these as normal procedures, but cryptocurrency investors are interpreting this as a bullish signal for risk assets.
The mechanism of repo transactions and their impact on the market
Repurchase transactions (repos) are a key means of managing daily liquidity in the financial system. In repos, the Federal Reserve lends cash to banks in exchange for high-quality collateral such as government bonds. Typically, banks return the cash within one day and reclaim the collateral assets.
This operation is
Providing sufficient cash to the financial system
Curbing the surge in short-term interest rates
Reducing stress in the capital markets
As the year-end approaches, liquidity tends to tighten and activity increases.
According to Federal Reserve data, the average daily trading volume in the SOFR (Secured Overnight Financing Rate) market in 2025 is $2.7 trillion, with repo transactions exceeding $1 trillion. This number indicates that such measures are essential for market stability.
The operation on December 22 is scheduled to be conducted with a cap of $68.01 billion according to the Federal Reserve's schedule. It will be the first liquidity-adding repo since 2020, differing from the standing overnight repo facility established in 2021.
On December 10, 2025, the New York Fed announced a significant update regarding overnight repo operations. It abolished the limit on the total transaction cap and shifted to a full allotment method with an individual proposal cap of $40 billion. This expands the Federal Reserve's ability to respond to interest rates and liquidity conditions.
Not quantitative easing, but highly significant
Some market participants speculated that this indicates a sign of policy change, but many experts hold differing views. Repos are significantly different from quantitative easing (QE). QE involves permanent asset purchases that expand the Federal Reserve's balance sheet, while repos are temporary and self-correcting.
"What is important is that this is neither QE nor money printing, nor is it a signal of easing from the Federal Reserve. Cash will be repaid. However, it does indicate that liquidity is still somewhat tight," commented analyst ImNotTheWolf.
This distinction is critical. While QE suggests a shift towards economic stimulus, repos only target technical issues in the money market. However, the increased demand for banks to borrow reserves indicates tightening liquidity.
Timing is also important. At year-end, banks have heightened reserve demands due to regulatory compliance and balance sheet management. As a result, short-term funding costs rise, and the use of repos tends to increase.
The Federal Reserve also announced the purchase of approximately $40 billion in government bonds for reserve management starting December 11, 2025.
These measures are to maintain ample system reserves and respond to seasonal liquidity demands. The Federal Reserve is poised to enhance year-end measures through multiple means.
The response of the cryptocurrency market and future outlook
The official explanation is formulaic, but the response from cryptocurrency investors is positive.
Cryptocurrency traders often link increased liquidity to a favorable environment for risk assets. When financing becomes easier, capital tends to flow toward high-yield opportunities. Historically, BTC and cryptocurrencies tend to rise during periods of central bank liquidity provision.
"If funds increase in the market, funding costs will decrease and stress will lessen, creating favorable conditions for risk assets like BTC and cryptocurrencies," wrote analyst TheMoneyApe.
Some analysts have mentioned the possibility of quantitative easing being implemented in early 2026, but there has been no such announcement from the Federal Reserve.
Currently, the central bank is focused on maintaining a tightening policy to bring inflation back to 2%.
In the coming weeks, it is expected to become clear whether this repo will be a year-end limited measure or a sign of ongoing liquidity support.
Market participants are closely watching the Federal Reserve's announcements and data to gauge policy trends for 2025. In the meantime, the December operations suggest the central bank's flexible response to contain stress in the funding market.
