Recently, as soon as the Federal Reserve meeting ended, the buzz in the background consultation channels never stopped. Some are eager to ask if the floodgates are opening, some are rubbing their fists ready to go all-in, and others are digging into history, saying that last time the flood caused Bitcoin to triple in value—will this time replicate the miracle?

Honestly, this question seems simple, but in reality, it’s a deep trap. Having been in the circle for so many years, I’ve seen too many newcomers get wiped out by this logic. Today, I’ll break down how the Federal Reserve’s liquidity injections affect the crypto market, so that after listening, you can operate with fewer pitfalls.

**What is the essence of liquidity injection**

The Federal Reserve’s liquidity injection, in plain terms, is printing money. By buying government bonds and cutting interest rates, it increases market liquidity and lowers borrowing costs. These new funds have a clear characteristic—they tend to flock to high-yield, highly liquid areas. As a high-risk, high-reward field, the crypto market indeed attracts some hot money, but there are two issues that can easily cause losses: first, a “time lag,” and second, the hierarchy of capital entering the market is very particular.

**Why doesn’t it always lead to a rise immediately**

At the initial stage of liquidity injection, institutional funds enter with strict risk controls. They don’t blindly rush into small-cap coins but prioritize large-cap cryptocurrencies like Bitcoin and Ethereum, which have ample liquidity and broad consensus. This creates a clear phenomenon: mainstream coins move first, followed by altcoins, but the differentiation among them is extremely fierce.

Take the March 2020 Federal Reserve liquidity boost as an example. When the signal was first released, Bitcoin indeed led the charge. That’s why we often see the “leading effect”—when Bitcoin moves, other coins gradually follow. But if you only focus on small-cap coins at that time, it’s easy to miss the main upward wave.

This is the hurdle, and it’s also why you shouldn’t rush into operations based solely on the words “liquidity injection.”