2026-01-02 13:23:36

At the beginning of the new year, one event has attracted attention in the financial circle: the Federal Reserve injected $31 billion in overnight funds into the banking system. This is the largest short-term liquidity injection since the COVID-19 pandemic, even surpassing the peak during the internet bubble in 2000.

But there is an important detail to clarify. This money is neither a rate cut policy nor traditional QE easing. The real situation is: the willingness of banks to lend to each other has decreased, short-term liquidity has become tight, and institutions are struggling even with overnight fund turnover. This is more like an emergency operation to alleviate short-term liquidity pressure.

In theory, increased market liquidity should raise risk assets like Bitcoin. But reality has given us a slap. Currently, Bitcoin is hovering around $88,600, with a slight increase (1.3% intraday gain), but just the day before, it experienced a rapid drop from $89,000 to $87,000. This wave of decline caused over 160,000 liquidations across the network. Even more painfully, Bitcoin has fallen nearly 30% from its October 2022 high of $126,000, now oscillating between $87,000 and $89,000.

Why does this "divergence" occur? The reasons are actually obvious. First, the Federal Reserve's $31 billion mainly circulates within the banking system and is difficult to flow into the cryptocurrency market; second, investors are still worried about high interest rates and unclear regulatory policies, making them hesitant to chase risky assets; third, the previous large declines have wiped out a lot of leveraged positions, and speculative enthusiasm in the market has significantly decreased.

However, a turning point is also emerging. Bitcoin's Fear and Greed Index has risen from "Extreme Fear" to "Fear," indicating that selling pressure is easing. From a historical perspective, this round of liquidity injection by the Federal Reserve sends a long-term signal: global central banks' easing measures will eventually flow into Bitcoin and crypto assets. The current volatility may just be the market reallocating funds, waiting for the next upward phase.

In the short term, attention should be on whether Bitcoin can break through the $90,000 threshold; looking ahead, whether the Federal Reserve will continue to inject liquidity, and whether these funds can ultimately flow into the crypto market—these are key factors that will determine the future trend.

BTC2.46%

View Original

This page may contain third-party content, which is provided for information purposes only (not representations/warranties) and should not be considered as an endorsement of its views by Gate, nor as financial or professional advice. See Disclaimer for details.

11 Likes

Reward
11
5
Repost
Share

Comment

0/400

NervousFingers

· 4h ago

$31 billion injection results in Bitcoin still falling, the banking system is a black hole, it simply can't flow to us There is always liquidity injection every year, but the crypto circle is still getting beaten up. The promised water flows to the low places, right? 16,000 liquidation, how crazy is this leverage? No wonder no one dared to take over in 98 Why is it so hard to break through the 90,000 mark? Feels hopeless The central bank is printing money, but we can't receive it. That's awkward Fear index improving? I think it still needs to fall further to be cleaned up. That's when the real opportunity will come

View OriginalReply0

SwapWhisperer

· 4h ago

$31 billion has entered the banking system, and we're still trapped... This is almost like playing a word game. --- 160,000 traders got liquidated. That must be painful. Leverage is truly a poison. --- The liquidity injection is real, but money just can't flow into the crypto space. It feels like a one-sided promise. --- Waiting for 90,000, or maybe another dip to clear out and reset to zero, so it won't be so painful. --- Basically, the market is still waiting to see when the Federal Reserve will truly loosen monetary policy. --- From 126k down to 88k, this drop isn't just cleaning out leverage—it's looting. --- Is the fear index rising? I think it might need to go even lower to find a bottom before a real rebound.

View OriginalReply0

CryptoFortuneTeller

· 4h ago

Here we go again with the same rhetoric, will liquidity eventually flow into the crypto space? When was the last time it was said like this… --- $31 billion entered the banking system, and we’re waiting for it to flow into crypto? Uh, probably not very likely. --- The data of 160,000 liquidations is truly astonishing. Every time this happens, I feel especially lucky not to be leveraged. --- Whether the 90,000 level breaks or not doesn’t matter; this oscillation is just market absorption, right? --- When will the issue of unclear regulation be resolved? Now even buying coins has to be done cautiously. --- Honestly, who are the people being wiped out in this sell-off? But the bottom should be close. --- Do we have to wait for the Fed to print more money before it finally flows into crypto? Wake up, brother, the banking system is a closed loop; we can’t benefit from it. --- Since dropping from 126,000 to now, my friend has lost a lot. Is this what they call reallocation? That’s a joke. --- I believe the fear index is decreasing. Is there a chance for a rebound? Not sure how much longer we have to wait. --- Bitcoin keeps squeezing within the 87-89k range every day. It’s really annoying. When will we see some real movement?

View OriginalReply0

NftBankruptcyClub

· 5h ago

I've seen this trick before, $31 billion went into bank pockets, and we're still hovering around $88,000... LOL --- It's another "long-term signal," what can we do if we don't have short-term funds? By the time the central bank floods the market, I guess we've already been cut. --- The moment 160,000 people got liquidated, I knew it was time to clear the market. --- Can the 90,000 hurdle be broken? It feels like we need to wait for the next round of institutional entry for any hope. --- Regulatory policies haven't even been finalized yet, who dares to go all in? It's just gambling. --- From 126k to now, this bear market "opportunity" probably needs to be observed for a while. --- Federal Reserve easing = crypto prices rising, this logic sounds good but in reality... banks and our money are not on the same line. --- The fear index has risen from extreme fear to fear, honestly, it's still fear, nothing to get excited about. --- I'm more concerned about my wallet than the $90,000.

View OriginalReply0

FarmToRiches

· 5h ago

160,000 people liquidated, this drop is really fierce, it feels like leverage traders are about to be cleaned out again. The Federal Reserve is printing money, but we can't benefit from it; the internal circulation within the banking system is indeed impressive. It will look a bit more comfortable once it breaks through 90,000, otherwise we're still stuck in this repetitive cycle. The whole market is still on the sidelines, with the regulatory hammer hanging overhead, no one dares to rush in. From extreme fear to fear, at least the mindset has changed; take it slow. This adjustment might be another good opportunity to get in; it all depends on how the Fed will operate next.

View OriginalReply0