The Federal Reserve has just sent a major signal. Early this morning, the Fed injected $16 billion into the banking system through overnight repurchase operations—this is the second-largest single injection since the outbreak of the COVID-19 pandemic, second only to the emergency bailout at that time.

What does this liquidity injection really mean? According to Fed data, they are continuously purchasing Treasury securities through temporary open market operations, with a significantly increased pace. Notably, the gray shaded areas on the historical charts—these mark periods of US economic recession. Some are beginning to worry whether the Fed’s series of actions are a prelude to cooling down the economy.

For the crypto market, this signal could trigger a chain reaction. Loose liquidity typically increases volatility in risk assets, affecting the crypto, stock, and bond markets. Once expectations of easing tighten, market participants need to stay alert—large fluctuations are both risks and opportunities.

Traders are now watching closely because no one wants to fall behind during this critical period. Whether going long or short, understanding the logic behind this liquidity injection is key to breaking the deadlock.