TLDR
- The US Federal Reserve injected $13.5 billion into the banking system through overnight repurchase agreements.
- This liquidity boost marks the second-largest since the Covid pandemic and follows a separate $25 billion operation.
- Bitcoin saw a 2% price increase, rising to $86,900 after the Fed’s liquidity injection.
- MSTR stock rebounded with a 0.68% gain in pre-market trading following the liquidity action.
- MicroStrategy added $11.7 million in Bitcoin to its holdings, bringing its total to 650,000 BTC.
The US Federal Reserve (Fed) injected $13.5 billion into the banking system on December 1. This was done through overnight repurchase agreements, marking the second-largest liquidity injection since the pandemic. The move followed the end of quantitative tightening (QT) and sparked reactions in Bitcoin and MSTR stock.
Repo Operation Injects $13.5B into the Banking System
The Federal Reserve Bank of New York conducted an overnight repo operation, injecting $13.5 billion into the financial system. This came after a separate $25 billion liquidity operation earlier in the day. The collateral for the repo included $12.5 billion in treasuries and $12.5 billion in mortgage-backed securities.
The $13.5 billion injection is one of the largest in recent years. It stands as the second-biggest since 2020, surpassing the Dot Com Bubble-era injections. “This is a clear sign of stress in the system, with repo demand rising as liquidity tightens,” said a financial analyst.
Bitcoin Responds to Fed Liquidity Injection
Bitcoin (BTC) saw a 2% price increase following the Fed’s liquidity injection. The price jumped from $83,862 to $86,900, with an intraday high of $87,325. Over the last 24 hours, trading volume increased by 13%, signaling growing interest from traders.
This boost in Bitcoin price comes after a period of decline in the crypto markets. The Fed’s move provided a slight rebound as traders monitor upcoming economic events, including next week’s FOMC interest rate decision. However, analysts are cautious as they await further signals from the Fed.
MSTR Stock Responds to Liquidity Injection
MicroStrategy (MSTR) stock also reacted to the Fed’s liquidity actions. The stock saw a pre-market rise of 0.68%. This came after a 3.25% drop in Monday’s trading, driven by a selloff in the crypto market.
MicroStrategy, a company heavily invested in Bitcoin, added another $11.7 million in BTC to its holdings. This increased its total Bitcoin holdings to 650,000 BTC. Despite this, MSTR stock faced volatility due to the market’s response to crypto fluctuations and the broader liquidity concerns.
The Fed’s liquidity injections have become a regular feature in recent months. They reflect broader concerns about liquidity stress within the banking system, echoing the 2019 repo crisis.
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