Recently, the Federal Reserve has taken another round of actions—on December 30, it injected $16 billion into the market through overnight repurchase agreements, marking the second-largest liquidity injection since the pandemic. Some have asked whether this will help the crypto market? Let’s take a look.

It is said that Reserve Management Purchases (RMP) do not count as quantitative easing (QE), but in essence, it is an expansion of the balance sheet, which has a short-term transmission effect on high-risk assets. When money flows in, the cost of market funds decreases, and this liquidity may channel through institutional channels into crypto assets.

Looking at the current market, Bitcoin is around $87,000, with a 24-hour trading volume skyrocketing by 61.96%, and a price increase of 1.54%. More importantly, Bitcoin’s market dominance (BTC dominance) is as high as 59.35%, indicating it still holds the leading position, and other coins tend to follow when it rises.

Major data shows that institutions have quietly increased their holdings by 42,000 BTC to hedge against ETP outflows. Coupled with this liquidity boost, Bitcoin is likely to continue oscillating upward. Ethereum is expected to follow suit, but the strength won’t be too significant—DeFi ecosystem capital transmission has a time lag, and with perpetual contract basis so low right now, leveraged funds are also cautious about entering.

Don’t expect much from small and mid-cap coins. After a $6.8 billion injection previously, the crypto market experienced liquidations of $250 million within 24 hours. Deleveraging is still ongoing, and most altcoins are oscillating within a range, even weakening due to capital siphoning.

What’s the safest way to operate? Layered deployment is key:

For spot trading, you can hold a light position in Bitcoin, controlling your position at 50%-60%, with a stop-loss set at the $85,000 support level; on the derivatives side, stay away from high leverage, and operate within the current 45% volatility range.

For the long term, keep an eye on the ON RRP balance (currently still at $268.7 billion) and the SOFR-IORB spread. If liquidity continues to loosen, you can increase positions in mainstream coins like Ethereum; if the spread starts to widen, you should quickly reduce your risk exposure.

Finally, it’s important to clarify that the $160 billion scale is just the tip of the iceberg compared to the QE measures of 2020, and most of this money circulates within the banking system. It’s unlikely to trigger a trend-driven rally in the crypto space. Short-term trading must prioritize risk control.