Federal Reserve Injects Liquidity into Financial System for First Time Since 2020, Boosting Risk Appetite and Asset Prices

The Federal Reserve has resumed liquidity injections into the financial system, injecting over $18 billion through repo operations in early December 2025. This marks the first meaningful liquidity expansion since the 2020 pandemic response and is seen as a clear inflection point. Past cycles have shown that liquidity expansion lifts asset prices by lowering financial friction and encouraging leverage, with Bitcoin surging over 300% in the months following similar injections in late 2020. Risk assets have already shown sensitivity to the shift, with crypto markets stabilizing and equities absorbing selling pressure more easily.