There is a major recent event in the market worth paying attention to——the Federal Reserve has announced that starting from January 20th, it will inject liquidity by purchasing short-term government bonds, amounting to approximately $55 billion. Many people's first reaction was to think this was an emergency rescue measure, but in fact, this is the Fed's routine operation after ending quantitative tightening, aimed at maintaining reserve levels in the banking system and controlling monetary policy.

Let's first see what this means for the market. The injection of funds into the banking system will lower short-term borrowing costs, and overall market liquidity will become more relaxed. This move is particularly friendly to risk assets—both stocks and cryptocurrencies are likely to benefit. The crypto market has already sensed this, with many analyses suggesting that this could create favorable conditions for a rebound in Bitcoin and ETH, based on the historical pattern that after quantitative tightening ends, similar measures are taken.

For Ethereum, there could be significant support in the short term. If macroeconomic conditions align well, such as confirmed expectations of rate cuts, the effect will be even more pronounced. Usually, Bitcoin rises first (as people consider it digital gold), and then the ripple effect spreads to other coins, with ETH also benefiting. Plus, with BlackRock's Ethereum spot ETF continuing to attract capital, the dual forces of institutional funds and Fed liquidity could amplify Ethereum's upward movement. However, to be honest, Ethereum still mainly benefits from Bitcoin and overall risk appetite.

But there are uncertainties. If the injection scale ends up being smaller than expected, or if employment and inflation data turn hawkish (more tightening), prices could pull back. The current crypto market is very sensitive to Fed actions. Although many interpret this $55 billion as a form of indirect liquidity injection, it is essentially temporary and not a permanent stimulus.

From the broader environment, the shift of the Fed from tightening to neutral or even easing has become quite clear. There may be 2-3 more rate cuts by 2026, which is a long-term positive for risk assets like Ethereum. But we should also be cautious of some easily overlooked risk factors—such as the tax season at the end of January potentially draining liquidity again, as well as geopolitical tensions and policy black swans.

If you hold Ethereum, this is indeed a positive macro catalyst, but don’t forget to observe from multiple angles, combining on-chain activity data and actual ETF inflows. It’s recommended to start monitoring changes in the NY Fed’s repo and RRP data, as well as the SOFR rate trends, as these indicators can directly reflect the actual effects of liquidity injections.