The Federal Reserve's "tug-of-war" reappears, Christmas market under the shadow of QE4: Bitcoin's "Ice and Fire" Double Extremes

Brothers, this round of the Federal Reserve's operations has truly left everyone stunned. On one side is "constipation-style liquidity injection"—a single-day spree of 6.8 billion on December 22, totaling 38 billion over 10 days; on the other side is "muscular liquidity withdrawal"—reverse repurchase agreements (ONRRP) exceeding 13.5 billion in a single day. This scene is like drinking beer while scratching your throat—nothing left after, just ceremonial. But the truth is far more surreal; this "liquidity scam" is reshaping the underlying logic of the entire financial market.
1. "Liquidity injection + withdrawal": The Fed's split personality game
This story starts at the source. The U.S. government shutdown for three months, with national debt soaring by 700 billion dollars, directly turning the interbank market liquidity into a "desert." Small banks face skyrocketing borrowing costs, real economy loans become nearly impossible, and citizens' wages have shrunk for three consecutive months—typical of "champagne on top, cigarette butts below."
But does the Fed just sit idly? Of course not. It launched the Bank Term Funding Program (BTFP), essentially a "cloak" for QE. Citi strategists have long exposed this: "The Fed's new BTFP is just another name for QE; banks' reserves at the Fed will increase, technically no securities are bought, but the effect is identical."
Even more cunning is "precise watering." The Fed supports the financial markets by injecting liquidity while using reverse repos (ONRRP) to drain excess liquidity. This isn't schizophrenia but the ultimate expression of "both want and need": maintaining financial system stability while controlling inflation expectations; providing blood to Wall Street while preventing a flood of dollars from hitting small shops on the street. The result? Liquidity flows into the S&P 500 and gold (up 68% in a year), while the real economy's fields crack and dry.
2. Bitcoin's "sickly market": the tug-of-war between fear and greed
This "liquidity scam" has directly caused the crypto market to enter a "sickly market" phase. The Fear & Greed Index drops to the extreme fear zone at 25, but on-chain data hides clues:
• Stablecoin reserves are full: $230 billion in stablecoins lying on-chain, ready to launch a charge at any moment
• Technical critical point: Bitcoin repeatedly bounces near the $89,000 resistance; once it stabilizes above $90,000, the next target is directly $93,000
• Policy hedging: The new head of the China Securities Regulatory Commission + Biden's administration treating crypto as a cash machine, turning political risk into a "safety cushion"
The question is: why, with ample liquidity, does the market seem to catch a flu and stay in bed? Because smart money is waiting for the Fed to reveal its hand. It's like the night before an "all-in" on the poker table—everyone is watching the opponent's last card.
3. The ghost of QE4: a "Schrödinger's" prediction for the Christmas rally
The hottest question now: has QE4 secretly started? According to Futu NiuNiu statistics, since 1969, the Christmas market (last 5 days of the year + first 2 days of the new year) has averaged a 1.3% rise in the S&P 500. But this year, the pattern might be broken.
Two scenarios:
Gentle version: monthly purchase of 40 billion in government bonds, precisely filling liquidity gaps. Risk assets (including Bitcoin) can get a sip, but not a full meal. Under this, the Christmas rally is likely to be "lukewarm," with small gains but no wild celebrations.
Aggressive version: monthly spending of over 60 billion, flooding the market. Wall Street will pop champagne, and Bitcoin might follow stocks to new highs. But the cost is exploding inflation expectations and a potential credibility crisis for the Fed.
Crypto insiders' view: when the Fed itself is caught in a tug-of-war, with inconsistent signals, the traditional game rules are shattering. This Christmas, the "must rise" assumption for the market is likely to be broken because liquidity distribution mechanisms have already become distorted—water is in the pool, but the leading asset is clenched tightly by Wall Street.
4. Keep an eye on these two "soil indicators," don’t be naive
The Fed's moves are opaque to the public, but we can observe phenomena:
1. Reserve ratio: can it return to a safe level (usually above 12%)? This determines whether small and medium banks still have "reserves" to support real economy lending.
2. ONRRP balance: is it close to drying up? Currently, the ONRRP scale remains high, indicating that liquidity isn't actually "lacking," but funds are just rotating between banks.
Simply put: decreasing ONRRP + rising reserves = gentle QE4; collapsing ONRRP + soaring reserves = aggressive QE4. The current situation is both high and fluctuating, showing the Fed is also feeling its way forward.
5. Practical advice for brothers
Short-term (late December - early January):
• Lighten up for the holidays: Christmas market is highly uncertain, don’t go all-in betting on big moves
• Watch the 89,000 level: break and hold can be a signal to add small positions; break below 85,000 and cut losses decisively
• Hedge against rate hikes: historically, Japanese rate hikes → Bitcoin retraced about 15%, keep some bullets ready
Mid-term (Q1 2026):
• Stablecoin trends: $230 billion in stablecoins is "dry tinder," waiting for a spark (policy favorable news or technological breakthroughs)
• SEC new leadership: in Biden's era, regulation may shift from "tightening openly" to "tightening secretly," facilitating institutional entry
Long-term:
• QE4 will eventually land: regardless of its name, under economic recession pressure, the Fed will inevitably step in to buy government bonds. This is the ultimate bullish factor for Bitcoin, but the path will be winding.
Conclusion: Finding certainty in a scam
Brothers, history doesn't simply repeat, but it often echoes startlingly. QE in 2008 gave birth to crypto gold; QE3 in 2020 directly ignited institutional bull markets. Today’s "constipation-style liquidity injection" is ugly but clear in direction: the underlying logic of the financial system has collapsed, and the gap between traditional assets and crypto assets is deepening.
This Christmas, instead of betting on market ups and downs, think about one question: when the Fed's "firefighting water pipes" and "water pump" are both working, are your assets in a swimming pool or in a desert?
Brothers, how long do you think this Fed "tug-of-war" can last? Will QE4 be officially announced in 2026? Leave your judgment in the comments! If you find this analysis reliable, like and share to let more brothers understand this grand chess game! For real-time on-chain data monitoring, remember to follow the Crypto Gold Digger. See you next time as we continue to uncover the Fed’s secrets!