The Federal Reserve recently took a seemingly insignificant action—eliminating the daily $500 billion cap on the Standing Repo Facility (SRF). But don’t be fooled by this superficial "technical adjustment"; it actually sends a very important signal to the entire financial market, including the crypto space.

As someone who has been analyzing crypto assets for many years, I increasingly realize one thing: the Fed’s ability to control liquidity is far more sophisticated than most blockchain project teams.

**How do liquidity tools work?**

Simply put, the Fed’s repo tool is like the market’s "liquidity emergency room." Financial institutions hold high-quality assets like Treasury bonds but temporarily lack cash? No problem, they pledge these assets to the Fed in exchange for short-term loans. This logic is essentially the same as pledging Bitcoin to borrow stablecoins, just with much more complex rules and on a much larger scale.

The SRF sets a ceiling on market interest rates. When institutions find that borrowing from the market costs more than borrowing from the Fed, they naturally queue up to borrow from the Fed. This prevents market interest rates from soaring.

Conversely, the Overnight Reverse Repurchase Agreement (ONRRP) sets a floor on interest rates. When there’s too much market liquidity and rates tend to fall, institutions can deposit their idle funds with the Fed to earn a risk-free return. This prevents rates from dropping too low.

**What does this mean for your wallet?**

Once this system is operational, liquidity conditions become relatively stable. For the crypto market, when traditional financial liquidity is abundant, risk assets tend to be more sought after; conversely, if the Fed tightens its purse strings, crypto assets usually come under pressure.

The Fed’s removal of the $500 billion cap actually signals to the market: we have the capacity to supply more liquidity, so there’s no need to worry too much. This can boost risk asset sentiment.

But don’t forget, all of this is based on policy guidance. Keeping an eye on the Fed’s actions is indeed meaningful for trading decisions.