As of the morning of December 25, 2025, the Federal Reserve's overnight fixed-rate reverse repurchase agreement (RRP) operation accepted only 8 counterparties, with a total amount of $4.803 billion, a significant contraction compared to the peak usage of $136.799 billion on May 17 of this year. Against the backdrop of the CME "FedWatch" indicating an 86.7% probability of maintaining interest rates in January 2025, this small-scale reverse repurchase seems more like a slice of funds that "prefer to stay in money market instruments rather than rushing into high-risk assets" under a high-interest-rate framework. In the short term, crypto investors need to focus on whether the reverse repurchase balance remains low, whether interest rate expectations loosen, and whether BTC/ETH can attract limited liquidity ahead of altcoins.
Core of the Event
On December 25, 2025, at 8 AM UTC+8, the Federal Reserve, in its latest fixed-rate reverse repurchase operation, accepted 8 counterparties, with a total of $4.803 billion "deposited" at the Federal Reserve. Compared to a recent operation that accepted 25 counterparties with a total of $51.802 billion, this scale is at the lower end of the recent range and far below the $136.799 billion usage scale of the overnight reverse repurchase on May 17.
Reverse repurchase agreements (RRP) are a regular liquidity management tool of the Federal Reserve: institutions like money market funds lend cash to the Federal Reserve in exchange for overnight interest, essentially "parking money at the central bank," earning risk-free returns while temporarily not participating in higher-risk asset games. The current $4.803 billion operation is not particularly noticeable within historical volatility ranges, but it occurs in a time window sensitive to year-end liquidity and where the market is highly focused on interest rate paths, thus holding certain observational value.
Incentive Analysis: News, Funds, and Sentiment
On the news front, CME "FedWatch" shows that market bets on the January 2025 meeting are very concentrated: the probability of a 25 basis point rate cut is only 13.3%, while the probability of maintaining rates is as high as 86.7%. This indicates that the mainstream pricing still leans towards "high rates lasting longer," with no obvious signals of a rapid shift towards easing in the short term.
On the funding side, on one hand, the reverse repurchase scale has shrunk from $136.799 billion in May to a recent range of tens to hundreds of millions of dollars; on the other hand, the Federal Reserve's policy rate remains relatively high, making the yields on risk-free or low-risk assets like money market funds and short-term bonds very attractive to institutions. In this combination, there are two typical behavioral logics for funds:
First, genuine funding tightness: banks and money market funds find little excess cash to place in reverse repos, retaining only a small balance needed for rigid demand. Second, marginal risk appetite warming: some funds shift from reverse repos to short-term bonds, credit, or the stock market, but may not directly enter higher volatility assets like crypto.
In terms of sentiment, the crypto community's public opinion has had almost no direct reaction to this $4.803 billion reverse repurchase, with little discussion on social media and overall market sentiment remaining calm. Instead, macro and cyclical narratives are more active among KOLs: some emphasize that we are currently in a monetary tightening cycle and it is unwise to rush into high-risk assets like altcoins; others look towards 2026 or even 2028, defining the present as a "preparation phase for the next cycle." From this perspective, this reverse repurchase seems more like background noise rather than a sentiment catalyst.
Deep Logic: How Tight is Money, and at What Level Does it Stop?
From a macro funding structure perspective, changes in reverse repurchase balances essentially answer two questions: first, how much "idle money" is still in the system; second, at what level of assets are these "idle funds" willing to stay.
Historically, the scale of overnight reverse repurchase agreements can fluctuate between hundreds of billions to trillions of dollars. The $136.799 billion on May 17 is already far smaller than the trillion-level scale during the peak periods of 2022-2023. Now further contracting to $4.803 billion indicates a clear reduction in funds "willing to lie in the Federal Reserve's overnight tool," but this does not automatically equate to these funds flowing directly into Bitcoin and altcoins.
Year-end seasonality is also a key variable. During the period from Christmas to New Year, trading activity in the U.S. financial markets decreases, banks need to manage their balance sheets for year-end reports, and companies are also concentrating cash for payroll, taxes, and quarter-end settlements. These factors can temporarily push up demand for short-term dollar funding, compressing the balance available for reverse repurchase agreements, causing RRP scales to fluctuate sharply in mid to late December.
In terms of asset stratification, dollar funds typically move from "extremely low risk to high risk" in the following order: reverse repos/excess reserves → short-term government bonds, money market funds → investment-grade credit and large-cap stocks → high-valuation growth stocks → high-volatility assets (including crypto). The current combination of "low reverse repos + high rates" aligns more with funds primarily staying in short-term risk-free and low-risk assets rather than making a large-scale move into high-volatility assets.
For the crypto market, Bitcoin and Ethereum are generally viewed as the "relatively low-risk layer within crypto," while altcoins are positioned further back. The emergence of ETFs, compliant custody, and other tools is helping to bridge BTC with traditional funds, but overall inflows remain constrained by the macro interest rate environment and institutional risk control constraints.
Bullish and Bearish Views: High Rate Reality vs. Easing Expectations
Within the current framework, the divergence between bulls and bears is concentrated on whether to focus on the current high rate reality or to bet on a potential easing cycle in advance.
From the bullish perspective, the political cycle and expectations regarding Federal Reserve personnel are key narratives. The market is paying attention to the expanding influence of Trump's camp on the Federal Reserve, with some voices on Wall Street betting that White House advisor Kevin Hassett and others may become candidate chairpersons, expecting that the monetary policy stance may be relatively more dovish in the next two to three years. At the same time, BTC spot ETFs and arrangements related to listed company asset reserves (DAT) continue to provide a story of institutionalized allocation for Bitcoin. Under the bullish logic, Bitcoin is seen as a potential "policy beneficiary main asset," with the opportunity to gain liquidity ahead of altcoins during the future easing cycle.
The bearish perspective, however, focuses more on current constraints. First, CME data points to an 86.7% probability of maintaining rates in January, indicating that the high-rate environment is unlikely to change significantly in the short term, and funds can obtain decent risk-free returns through short-term bonds and money market funds, with no urgent reason to shift towards the highly volatile crypto assets. Second, many altcoin projects lack clear cash flow, with varying quality of total value locked (TVL), and some protocols being centralized and lacking transparency, compounded by regulatory uncertainties, making their survival and pricing during a tightening cycle face discounts. Finally, the long-term outlook for 2026 and 2028 mentioned by some KOLs is more based on subjective judgments of political elections and historical rhythms, lacking verifiable hard timelines.
From a funding structure perspective, institutions and retail investors, as well as domestic and offshore funds in the U.S., do not price risk the same way. Institutions are more constrained by risk budgets and compliance frameworks, preferring to prioritize allocations to BTC and some large-cap blockchain assets before considering marginal altcoins; offshore retail investors are more easily swayed by emotions during low liquidity phases, chasing highs and cutting losses. This creates a structural pattern of "strong mainstream coins, weak altcoins," which may continue to exist throughout the high-rate tail end phase.
Outlook: When Will Reverse Repurchases and Rates Truly Transform into Market Trends?
From a data perspective, this $4.803 billion reverse repurchase alone is insufficient to trigger a trend reversal; what is more worthy of attention is the evolution of the next few "conditional groups."
At the macro level, the first is the interest rate path. If the Federal Reserve begins to implement substantial rate cuts under the premise of falling inflation, and if the number and pace of rate cuts exceed current market pricing, then the decline in risk-free rates will weaken the attractiveness of money market funds and short-term bonds, releasing some risk budgets for the stock and crypto markets. Secondly, the continuous changes in reverse repurchase balances and short-term rates, rather than just the single-day figures of $4.803 billion or $51.802 billion, are crucial. Only when RRP remains at a low level for an extended period and short-term funding rates clearly decline can we have more reason to believe that "money is truly returning from the central bank level to the market level." Finally, once the market forms relatively stable expectations regarding the new Federal Reserve chair and policy direction, the volatility of long-term rates will decrease, making the asset pricing environment more favorable for long-term assets.
Internally within crypto, macro easing also needs to be accompanied by "endogenous drivers." This includes whether narratives like AI + Crypto, on-chain finance, and real-world assets on-chain can form sustained users and revenue, rather than just short-term concept speculation; whether compliant channels like ETFs and DAT can further expand, providing smoother entry for institutional funds; and whether the proportion of real users and long-term capital in the on-chain funding structure is increasing, to reduce the vulnerability brought by purely FOMO-driven dynamics. Only when the external "faucet" is slightly turned on and the internal "pipes" are sufficiently thick and stable can the crypto market be better positioned to absorb a new round of incremental funds.
From a rough scenario perspective over time:
In 2025, it is highly likely to remain a game between the tail end of high rates and a "bottoming period," with market trends primarily characterized by structural differentiation, where BTC/ETH has a higher probability of relative advantage.
In 2026, if the U.S. economy does not significantly fall into recession, and the new Federal Reserve adopts a more dovish monetary policy stance under political pressure, and if stock market risk appetite warms, then under the premise that Bitcoin has absorbed a large amount of liquidity, a phase of "small climax" in the altcoin sector is not impossible, but its timing and height will heavily depend on the macro and industry conditions at that time.
Around 2028, in a scenario where the election cycle and a potentially more accommodative environment may overlap, the crypto market has the opportunity to welcome a more complete main cycle narrative, but all of this is merely scenario extrapolation, not a definitive script.
For current investors, the combination of "low reverse repos + high rates" means that position management needs to respect the time dimension: on one hand, be cautious about the temptation of short-term rebounds in high-beta altcoins; on the other hand, if one recognizes the role of Bitcoin and leading assets in the future easing cycle, they can use a phased accumulation approach and extend holding periods to hedge against short-term macro uncertainties. Regardless, making decisions based on data and preset scenarios, rather than purely on emotions, will be key to navigating this high-rate tail end phase.
Within this framework, the $4.803 billion reverse repurchase is just a small piece of the year-end liquidity puzzle, yet it reminds the market once again: the roots of trends still lie in interest rates and liquidity, and what truly needs patience is the arrival of the moment when policy and funding "level transitions."
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