The Federal Reserve recently made a quite pragmatic adjustment—after the December meeting, the daily cap on the Standing Repo Facility (SRF) was directly removed. Previously limited to a scale of $50 billion, it is now possible to execute all qualifying bids from counterparties, although individual transactions still maintain a $4 billion cap. Overall, this increases flexibility significantly.

The reasoning behind this change is quite clear. As year-end approaches, liquidity tends to tighten, bank reserves are declining, the Treasury account is being drained, and quantitative tightening is ongoing. Short-term funding markets are inevitably prone to volatility. Removing the daily cap is essentially a proactive measure, leaving the system with more buffer space. Instead of waiting until a liquidity crunch actually occurs and scrambling to respond, this "emergency valve" is kept ready at all times to release liquidity pressure whenever needed.

In terms of effects, short-term interest rate indicators like SOFR are expected to become more stable and less prone to sudden spikes at month-end or quarter-end. For broader risk assets, a smooth liquidity environment prevents abrupt market shifts, helping maintain market sentiment. This isn't massive monetary easing, but it’s much more realistic than strictly enforcing the cap—able to handle emergencies without signaling excessive easing.

Honestly, the crypto market is often driven by emotions, with frequent chasing of highs and panic selling lows. However, occasionally looking at these internal financial system tweaks can reveal more prudent logic. Understanding how liquidity flows and how the central bank adjusts policy makes market fluctuations less frightening.