- Fed liquidity has jumped $395 billion since the start of the year, the largest 10-day increase in two years.
- Could this spark interest in riskier assets again?
Two market-wide crashes in less than a month reveal a striking change: the growing “inverse” correlation between macroeconomic trends and riskier assets. If the U.S. economy continues to show strength – like the 256,000 jobs created in December – the crypto market could take an unexpected turn.
With this in mind, it is more important than ever to keep a close eye on the U.S. economic calendar.
Unexpected opportunities ahead?
As the Dollar Index (DXY) remains firmly above 109 and the 10-year Treasury yield climbs to 4.79% – its highest level in 14 months – it is easy to assume that a transition to riskier assets like crypto or stocks is still not an option.
The S&P 500 recently lost $800 billion in market capitalization and is down 4.5% from its December peak. At the same time, the crypto market fell 8% in just one week from $3.6 trillion. Given these trends, the case for avoiding riskier assets appears strong.
But here’s the thing: The Federal Reserve’s net liquidity has increased by about $395 billion since the start of the year. High liquidity could signal a potential devaluation of the U.S. dollar, meaning the value of each dollar could decline.
Interestingly, the Dollar Index has made higher highs for four consecutive days, pushing its RSI into overbought territory. A correction could be near, and if the dollar weakens, Treasuries could become less attractive – a trend worth watching closely in the days ahead.
Source: TradingView
To add another layer, speculation is growing over liquidity injections from the Treasury General Account (TGA). As the United States approaches its debt ceiling, the Treasury could release significant liquidity into the market. As a result, this could further shake up the situation in the coming weeks.
The market remains cautious
Increased liquidity from the Fed and the US government is certainly a bullish sign, injecting new capital into the market. With the expected “Trump pump” adding to the optimism, things are looking up – at least for now. However, there is a catch.
With the debt ceiling fast approaching, investors may turn to safer, more stable assets rather than jumping into the volatile cryptocurrency market.
Read Bitcoin (BTC) Price Prediction 2025-26
For what? Treasury yields are expected to rise, especially as the Fed announces fewer rate cuts and the government relies on it to raise capital.
Although there is still hope, all eyes are now on the new administration. Will they impose tax cuts to unlock even more liquidity? If they do, it could devalue the dollar and make Treasuries less attractive.
The pressure is strong. Trump will have to prove that he really wants to keep his promises. Otherwise, 2025 could be a crazy year for the riskiest markets.
