The Federal Reserve injected $2.5 billion into the banking system through an overnight repurchase operation, temporarily buying Treasury securities from banks with an agreement to sell them back the next day.
Markets tracked Bitcoin around $87,500 after the move, with the crypto market broadly held steady as liquidity concerns remained in focus.
The U.S Fed also temporarily purchased Treasury securities for short-term cash.
The Fed temporarily bought Treasury securities from banks.
It was said they would sell the securities back to them the next day.
This structure enhances short-term liquidity without increasing the central bank’s balance sheet on a permanent basis.
The overnight repo is a regular mechanism to deal with funding conditions, especially when the demand for short-term cash increases.
The latest $2.5 billion operation may seem small compared to past Fed liquidity pumps, but it is getting attention for its overall effect.
Data showed that liquidity added by this year’s similar repo operations amounts to over $120 billion in total.
Federal Reserve officials have said that these operations are designed to change market mechanics, not directly raise asset prices.
Growing frequency is a different matter, with repeated operations signaling that the short-term funding still remains a problem.
At this point, the initial reaction in the crypto market remains somewhat muted.
Currently, Bitcoin is down by about 1% in the last 24 hours and is trading around $87,500, based on data from TradingView.
Total market cap is now down to about $1.74 trillion, and the daily trading volume is down by more than 11%.
Past market cycles carry many lessons that help to review projections of trends in liquidity and the potential impact on the crypto market.
Nevertheless, it is indicated that whereas overnight repos can help stabilize the market, this does not help much for the overall growth of the market.
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