In the early hours, while the vast majority of people are still tossing and turning in their dreams, the Federal Reserve has moved again. A $16 billion liquidity injection quietly flowed into the banking system through overnight repurchase agreements— the second-largest operation since the pandemic began.

The numbers sound a bit large, but what’s more shocking is the context: this scale even exceeds the peak of the internet bubble back then. I stared at the screen for most of the night, my eyes dry, but I became increasingly clear about one fact—this is not a routine operation; the Fed is ringing alarm bells.

Bank reserve buffers are now as thin as cicada wings, and the level of liquidity stress far exceeds normal end-of-month or quarter-end jitters. As someone who has been observing liquidity’s impact on crypto assets for a long time, I immediately thought of a question: how will this tidal wave of liquidity affect the prices of Bitcoin, Ethereum? How should we position ourselves?

**Policy’s Sudden Turn**

Returning to the Fed’s October meeting, they announced they would stop shrinking the balance sheet. The reason for this decision is quite straightforward—bank reserves have been steadily declining, falling below $2.9 trillion, the tightest since 2022. Even worse, the balance of overnight reverse repos has plummeted from $2-2.3 trillion in the second half of 2022 to less than a hundred billion now.

The liquidity pool in the money market is running dry, and internal liquidity within the financial system is sounding the alarm. This is a signal, and also a warning.