- Fed liquidity has increased by $395 billion since the beginning of the year, the largest 10-day increase in two years
- Could this reignite interest in riskier assets?
Two market-wide crashes in less than a month highlight a striking shift: the growing “inverse” correlation between macro trends and riskier assets. If the U.S. economy continues to show strength — like the 256,000 jobs added in December — the crypto market could take an unexpected turn.
With that in mind, keep the American economic calendar is more important than ever.
Unexpected opportunities ahead?
With the Dollar Index (DXY) remaining firmly above 109 and the 10-year Treasury yield rising to 4.79% – a 14-month high – it is easy to assume that a shift to riskier assets such as crypto or shares is still not an issue.
The S&P 500 recently lost $800 billion in market cap, falling 4.5% from its December high. At the same time, the crypto market has fallen 8% from $3.60 trillion in just a week. Given these trends, there seems to be a strong case for avoiding riskier assets.
But here’s the twist – Net liquidity of the Federal Reserve has increased by approximately $395 billion since the beginning of the year. High liquidity could indicate a potential devaluation of the US dollar, meaning the value of each dollar could shrink.
Interestingly, the Dollar Index has reached higher highs for four days in a row, pushing the RSI into overbought territory. A correction could be near, and if the dollar weakens, government bonds could become less attractive – a trend worth watching closely in the coming days.
Source: TradingView
As an additional layer, speculation about liquidity injections from the US is increasing General Account of the Treasury (TGA). As the US approaches its debt ceiling, the Treasury Department can release significant liquidity into the market. As a result, this could shake things up even further in the coming weeks.
The market still remains cautious
The increase in liquidity from both the Fed and the US government is certainly a bullish signal, injecting new capital into the market. With the expected ‘Trump pump’ increasing optimism, things are looking better – at least for now. However, there is a catch.
With the debt ceiling fast approaching, investors may turn to safer, more stable assets instead of diving into the volatile crypto market.
Read Bitcoin’s [BTC] Price forecast 2025-26
Why? Treasury yields are expected to rise, especially as the Fed signals fewer rate cuts and the government relies on raising capital.
Although there is hope, all eyes are now on the new government. Will they continue? tax cuts to unlock even more liquidity? If they do, it could devalue the dollar and make government bonds less attractive.
The pressure is great. Trump will have to prove that he is serious about delivering on those promises. If not, 2025 could be a wild ride for riskier markets.