💰 $29.4B Later — The Fed’s Liquidity Lifeline

The Fed quietly injected $29.4B, and investors are watching

On October 31, the U.S. Federal Reserve injected $29.4 billion into the banking system, its largest short-term liquidity boost since the 2020 pandemic.

It may lead risk assets like Bitcoin into an early November bull run.

Hoping to alleviate liquidity strains in money markets, the Fed used its Standing Repo Facility (SRF). However, central banks have begun weaning the financial system off record levels of cash as governments ramp up debt issuance, and cash is being siphoned away.

The Fed provided $29.4 billion in overnight loans to bolster the bank reserves pool, which had shrunk to about $2.8 trillion.

The decision sent repo rates lower and cooled the short-term funding markets, which had earlier been freezing up.

Fed boosts liquidity with repo loans

The Fed’s repo operation temporarily adds cash to the reserves of large banks and primary dealers to reduce short-term funding rates that recently rose to market-disrupting highs.

The SRF saw the Fed lend cash overnight against U.S. Treasuries and mortgage bonds, this keeps rates stable and guarantees that credit flows don’t freeze overnight.

What’s a Repo?

The last time the Fed made such a strong repo-related response was in September 2019. It then had to pump nearly half a trillion dollars into the markets over multiple months as repo rates unexpectedly spiked.

The question is whether such liquidity will reach those in need.

Not quantitative easing — Just short-term relief

Friday’s injection has added a new layer of uncertainty to the Fed’s year-end intentions.
Still, be assured that this is not quantitative easing (QE).

Unlike QE’s purchases of long-term assets, the SRF loans are short-term and reversible, the cash is withdrawn as loans mature. As a result, the motivation is only short-term, not fundamental.

Nonetheless, risk assets thrive on liquidity, and Bitcoin is usually the first to respond.
In 2020, when the Fed injected trillions of dollars to prevent credit from collapsing, BTC increased from $7,000 to $30,000 by the end of the year.

Rate Cuts in December?

The Fed’s previous two rate cuts, which Cryptopolitan published, included Chair Jerome Powell’s remarks:

This alert attitude caught economists off guard. They had predicted a decrease at the end of the year with a certainty of nearly 90 percent.

Treasury Secretary Scott Bessent said that portions of the U.S. economy are already on the verge of entering a recession, and the Fed’s actions have brought “distributional problems” that will be exacerbated if it does not ease soon.

Balancer software protocol vulnerabilities resulted in an exploit of one of DeFi’s oldest protocols.

The attacker exploited the Balancer with a loss of over an hour, siphoning over $116 million from wrapped ETH and related assets on Ethereum, Arbitrum, Base, and Optimism.

It was one of 2025’s biggest attacks on DeFi.

The exploit occurred when the roller coaster was allowed to mint unauthorized tokens due to a vulnerability in contract approvals. Meanwhile, a whale’s funds, which have been dormant for three years, were fully withdrawn.

The exploit compromised Balancer’s V2 pools, while V3 pools remained unharmed. Balancer has $678M in TVL, down from its $3.1B all-time high in 2022. The BAL trading volume is nearly nonexistent, with no daily volume.

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