The Federal Reserve (Fed) will inject about 6.8 billion USD into the financial market on December 22, 2025, through repurchase agreements (repo). This is the first liquidity injection of this kind by the Fed since 2020, with around 38 billion USD deployed in just the last 10 days as part of a plan to ensure year-end liquidity.
This move aims to address the year-end liquidity shortage and respond to new adjustments in the Fed's repo mechanisms. While Fed officials view this as a normal operation, the crypto investor community sees it as a positive sign for risk assets.
Learn about repo operations and their impact on the market
Repurchase agreement (repo) contracts are core tools for regulating the daily liquidity of the financial system. In a repo, the Fed lends banks short-term cash and receives high-quality U.S. Treasury securities as collateral. Banks typically repay the money very quickly, usually within 1 day, to reclaim their assets.
These activities:
Ensuring the system is always flush with cash
Prevent short-term interest rates from spiking, and
Reduce pressure on the capital market.
Repo activity often spikes at the end of December when market liquidity tightens.
Data from the Fed shows that in 2025, the average daily trading volume of the SOFR (Secured Overnight Financing Rate) market reached 2.7 trillion USD, with over 1 trillion USD conducted through repo activities. This indicates the essential role of this tool for market stability.
The operation on December 22 is scheduled with a cap of 6.801 billion USD. This is the first additional money injection through the Fed's repo since 2020, different from the overnight repo mechanism established since 2021.
On December 10, 2025, the New York Fed branch also announced several important updates regarding overnight repo operations: eliminating the total transaction limits and shifting to a full lending framework, with each instance capped at 40 billion USD. These changes allow the Fed greater flexibility in controlling interest rates and cash flow in the market.
Not quantitative easing, but still important
Some investors believe this is a sign that the Fed will change its policy, but most experts disagree. Repo operations are very different from quantitative easing (QE): QE is when the Fed buys permanent assets, expanding the balance sheet, while repo is just a temporary solution that automatically ends when the loan is repaid.
"Importantly, this operation is not QE, it is not printing more money, nor is it the Fed loosening policy because the money will be paid back. However, it also reflects that liquidity is scarce," commented analyst ImNotTheWolf.
This distinction is very important. QE typically indicates that the Fed wants to stimulate the economy, while repo is only aimed at addressing technical issues in the money market. However, the increasing demand for bank reserves indicates that liquidity is tightening.
The timing of the deployment is also noteworthy. At year-end, banks have a greater demand for reserves to meet regulatory requirements and manage their balance sheets. This increases the cost of short-term borrowing and makes repo activity more active.
The Fed also announced it would begin purchasing Treasury bonds to manage reserves starting December 11, 2025, totaling about 40 billion USD.
This purchase is aimed at keeping the system's reserves ample, addressing seasonal capital demands, and reinforcing the Fed's diversified approach during the end of the year.
The market's reaction to crypto and upcoming forecasts
Although the Fed asserts this is a routine operation, crypto investors react quite optimistically to this liquidity injection.
Crypto traders often link abundant liquidity with a favorable environment for risk assets. When borrowing is easy, capital flows to higher-yielding opportunities. In the past, BTC and other cryptocurrencies have typically surged when the central bank implemented these supportive measures.
"Injecting more money into the system means that capital is more accessible, with less pressure and tension, creating a favorable environment for risk assets like $BTC & crypto," analyzed by TheMoneyApe.
Some experts forecast that the Fed may ease quantitative easing in early 2026; however, the central bank has not yet issued any messages to that effect.
Currently, the Fed remains focused on maintaining a tight monetary policy to continue bringing inflation back to the target level of 2%.
The coming weeks will reveal whether these repo operations are merely year-end temporary measures or a signal that the Fed will continue to support liquidity longer-term.
Market watchers will continue to closely monitor information and data related to predict the Fed's policy in 2025. Currently, activities in December indicate that the Fed is ready to prevent liquidity stress while maintaining the current monetary policy stance.
