Federal Reserve to Resume $40 Billion in Monthly T-Bill Purchases, Stirring Debate on Liquidity and Crypto Prices

WASHINGTON, D.C. — The Federal Reserve will begin buying roughly $40 billion in short-term Treasury bills each month starting 12 December, ending its two-year period of quantitative tightening and marking the central bank’s first balance-sheet expansion since 2021.

The program, described by officials as “reserve management purchases” (RMPs), was detailed in a 10 December policy statement and subsequent press conference. According to Chair Jerome Powell, the purchases are intended to “maintain an ample supply of reserves” in the banking system and are not designed to deliver additional economic stimulus. Nevertheless, the action reverses the balance-sheet contraction that began in 2022 and reduces the volume of Treasury bills available to private investors.

Shift Follows Conclusion of Quantitative Tightening

Quantitative tightening formally ended with the same announcement, concluding a process that had gradually reduced the central bank’s asset holdings. By re-entering the market for short-dated government debt, the Fed will add liquidity at a pace not seen since its COVID-era bond-buying campaigns. The last comparable increase in reserves occurred in 2021, a period that coincided with rapid gains in risk assets, including technology equities and major cryptocurrencies.

While Powell called the decision a technical adjustment, market participants are focused on its practical effects. A growing supply of reserves can lower short-term funding stresses, push investors toward higher-yielding or higher-risk assets, and influence price discovery in sectors that react quickly to shifts in liquidity. Bitcoin (BTC), for example, remains below a widely watched resistance level, yet traders often view fresh central-bank balance-sheet growth as a potential catalyst for digital-asset markets.

Michael Burry Questions Banking-System Resilience

Investor Michael Burry, known for forecasting the 2008 housing downturn, raised concerns about the implications of the new purchases. In a social-media post, Burry noted that the Fed’s move adds another acronym—RMP—to a growing list of emergency or temporary facilities, such as the Bank Term Funding Program (BTFP). He argued that a system requiring “$3 trillion in reserves” signals fragility rather than strength.

Burry compared current reserve levels with historical figures: approximately $45 billion in 2007, roughly $2.2 trillion before the 2023 regional-banking turmoil, and a projected level above $3 trillion once the RMPs are underway. He contended that each post-crisis period forces the central bank to rebuild its balance sheet, potentially contributing to rising equity prices and sustaining risk appetite.

Analyst View: Possible Repricing of Crypto Assets

Market strategists tracking digital assets warn that the Fed’s renewed purchases could alter short-term pricing dynamics for cryptocurrencies. Liquidity injections historically channel excess cash into asset classes with higher volatility and growth potential. Although Bitcoin has yet to break past resistance, analysts point to previous cycles in which early moves in monetary policy preceded sharp rallies in crypto markets.

Some bank research desks have already updated their assessments of crypto-linked equities. Earlier this week, JPMorgan released revised ratings on companies with significant exposure to digital-asset revenue, citing the prospect of looser financial conditions. At the same time, other industry voices, including fund manager Cathie Wood, have publicly disagreed with Burry’s negative outlook on broader asset valuations.

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Mechanics of Reserve Management Purchases

Under the program, the Federal Reserve Bank of New York’s trading desk will conduct regular auctions in the Treasury bill market, sourcing securities with maturities of one year or less. The stated objective is to prevent reserves from falling below thresholds that could impair the central bank’s control over the federal-funds rate. A detailed operational schedule is expected before the first auction date.

According to the Fed’s latest data release, total reserves stood at roughly $3.1 trillion in early December. By adding $40 billion monthly, the balance sheet would expand by nearly $500 billion on an annualized basis if the pace is maintained. The central bank has not committed to a specific end date, saying only that purchases will continue “as needed” to safeguard money-market functioning.

For context, the Federal Reserve’s official balance-sheet statistics show assets peaked near $9 trillion in 2022 before quantitative tightening reduced holdings to about $7.7 trillion.

Impact on Treasury Supply and Investor Positioning

The revival of Fed demand for T-bills effectively lowers net supply at a time when the U.S. Treasury continues to issue debt to finance government operations. With fewer bills circulating in the secondary market, money-market funds may look to alternative placements, while institutional investors could reallocate toward higher-yield corporate debt or riskier segments such as emerging-market bonds and digital tokens.

Market observers caution that the relationship between liquidity and asset prices is not always linear. External factors—including fiscal policy, global growth prospects, and regulatory developments—also influence crypto valuations. Still, the immediate expansion of central-bank reserves is widely viewed as a supportive backdrop for speculative assets, at least in the near term.

Crédito da imagem: Federal Reserve