Liquidity Returns as the Fed Reignites Risk-On Conditions for the First Time Since 2020

Coin Bureau flags a major macro development. The Federal Reserve has resumed liquidity injections into the financial system. This marks the first meaningful liquidity expansion since the 2020 pandemic response. Early December 2025 data shows over $18 billion injected through repo operations. Markets closely track these moves because liquidity often dictates risk appetite.

Repo Injections Mark a Clear Inflection Point

The New York Fed’s repo data confirms a visible uptick in accepted amounts. After years of quantitative tightening and balance sheet runoff, this shift stands out. The timing matters. The Fed formally ended quantitative tightening on December 1, 2025. Repo injections now act as an early signal that policymakers want to stabilize funding markets and prevent stress from spreading.

Past cycles reinforce why traders react quickly. In late 2020, similar liquidity injections preceded a powerful risk-on phase. Bitcoin surged over 300% in the months that followed. Equities rallied alongside crypto as excess liquidity searched for returns. Liquidity expansion consistently lifts asset prices by lowering financial friction and encouraging leverage.

Crypto and Equities Respond to Early Signals

Risk assets already show sensitivity to the shift. Crypto markets stabilized after weeks of volatility. Equities also absorbed selling pressure more easily. While the current injections remain smaller than 2020 peaks, direction matters more than size at this stage. Markets front-run liquidity trends long before balance sheets expand materially.

Community sentiment echoes early-cycle optimism. Many traders compare current conditions to the early stages of previous bull runs. However, sustained impact requires follow-through. One-off injections do not guarantee a full liquidity cycle. Continued repo usage and broader balance sheet support will confirm whether this marks a durable policy pivot.