How Is the Fed Providing This Liquidity?

According to the Fed’s current operational schedule, the liquidity injection will be carried out through purchases of U.S. Treasury bills. Under the “current schedule,” the Fed plans to buy Treasury bills with maturities ranging from 4 to 12 months. These purchases cover securities maturing between April 23, 2026, and December 23, 2026, with a total operation size of approximately $6.801 billion.

Through these bill purchase operations, the Fed buys short-term government debt securities from banks and primary dealers, injecting cash directly into the financial system. Technically, this increases reserve balances within the banking system and eases short-term funding conditions.

What Does This Move Signal?

One critical point should be emphasized: this operation does not constitute quantitative easing (QE). It does not signal a long-term expansion of the Fed’s balance sheet. Instead, it is designed to temporarily increase the amount of dollars circulating in the system and to alleviate short-term liquidity stress.

Such measures are typically used to prevent upward pressure in the repo market, stabilize short-term interest rates, and ensure the smooth functioning of money markets. In that sense, the move does not imply a shift in the Fed’s interest rate policy, but it does indicate that policymakers are closely monitoring market conditions and remain ready to intervene when necessary.

What Does This Mean for Crypto Markets?

Crypto assets are widely considered risk-sensitive instruments and are particularly responsive to changes in global dollar liquidity. By injecting liquidity through Treasury bill purchases, the Fed may indirectly support a more favorable risk environment. This can create short-term tailwinds for Bitcoin and large-cap altcoins by improving overall market sentiment and liquidity conditions.

That said, the scope and duration of the operation matter. Because this liquidity injection is targeted and temporary, it should not be expected to trigger a sustained or structural bull market on its own. The dominant drivers for crypto markets remain the Fed’s interest rate outlook, the trajectory of balance sheet reduction (QT), and broader inflation dynamics.

A Technical Relief, Not a Strategic Shift

The Fed’s roughly $6.8 billion purchase of 4–12 month Treasury bills is best viewed as a short-term technical relief for the financial system. For crypto markets, it represents a supportive but limited development rather than a decisive turning point. For investors, the key question is whether such actions remain isolated interventions or mark the early stages of a broader liquidity cycle—an answer that will become clearer through upcoming Fed communications.

This content does not constitute investment advice.

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In particular, the latest remarks from Mark Cabana, a former New York Fed repo expert who is now working at Bank of America, have once again brought the possibility of a new wave of liquidity to the agenda. However, one critical point must be clearly underlined: These assessments are not an official decision for now, but merely Cabana’s projections based on market dynamics.

What Does Mark Cabana’s Liquidity Scenario Suggest?

According to Mark Cabana, Fed Chair Jerome Powell could put on the table a move to launch approximately $45 billion per month in Treasury bill (T-bill) purchases following this week’s FOMC meeting. It is stated that:

• $20 billion of this amount could be used to meet reserve needs in line with growing public liabilities,

• $25 billion could be allocated to replenish reserves that have been drained in the repo market.

According to Cabana, this process may not technically be labeled as “QE” (quantitative easing). However, since it would imply balance sheet expansion, it could effectively function as a mechanism that injects new liquidity into the market.

The Claim That “QT Is Over, the Liquidity Tap May Be Reopened”

One of Cabana’s most striking comments is his assessment that the quantitative tightening (QT) process may have effectively come to an end. According to him:

• At the December meeting, the Fed may not only implement a 25-basis-point rate cut,

• But may also quietly reopen the liquidity channel.

If this scenario materializes, starting from January:

• Monthly T-bill purchases of $40–45 billion,

• And term repo operations

could begin supplying additional reserves to the market.

Even if it is not officially called “QE,” such a step—implying balance sheet expansion—could serve as a strong short-term support factor for equities, crypto assets, and other risky instruments.

What Would Be the Market Impact If This Scenario Occurs?

Such liquidity expansion could technically be reflected in the market through several channels:

• Treasury bill purchases reduce the use of the RRP (Reverse Repo Facility),

• A drawdown in the RRP increases net system liquidity,

• Rising liquidity strengthens appetite for risk assets.

However, with Cabana’s own warning, such temporary liquidity support mechanisms could also lay the groundwork for greater valuation pressures in the long term.

What Do Institutions Expect from the Fed?

Bank of America’s View

According to Bank of America, even if the Fed continues to use cautious language, markets may begin to price in more aggressive rate cut expectations for January. The bank forecasts:

• A 25-basis-point cut in December,

• But also tighter forward guidance,

• And the possibility of several dissenting votes in the decision process.

Morgan Stanley’s Assessment

Morgan Stanley, taking into account recent Fed statements and market pricing, states that a 25-basis-point rate cut at the December meeting has now become a strong probability. According to the bank, the gap between market expectations and the Fed’s communication is narrowing.

A Striking Message from Hassett

Kevin Hassett, one of the White House’s economic advisers, also argues in his assessment of the Fed that the time has come to begin rate cuts in a cautious manner. This view is interpreted as a message in line with the shift signals expected by the markets.

What Do CME FedWatch Data Say?

Data from the CME FedWatch Tool, one of the most closely followed indicators in the futures market, show that investor expectations are shaping as follows:

• Probability of a 25-basis-point rate cut: 87.4%

• Probability of rates being left unchanged: 12.6%

These figures indicate that a rate cut at the December meeting has almost become the “base case” for the markets.

*This content does not constitute investment advice.

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What is Ondo US Dollar Yield (USDY)?

USDY, issued by Ondo USDY LLC, is a tokenized secured note distinct from other Ondo Finance tokens. It comes in two forms: “accumulating” USDY, where the per-token price rises with accrued yield, and “rebasing” rUSDY, which maintains a fixed $1 price with yield reflected as additional tokens. USDY tokens are minted 40-50 days after investment and can only be redeemed in USD to non-U.S. bank accounts. For example, if 100 rUSDY tokens at $1 each increase in value to match a USDY price of $1.01, you’d hold 101 rUSDY tokens at $1 each. Conversion between USDY and rUSDY is instant via the Ondo website.

Unlike Ondo’s OUSG, which provides tokenized access to short-term Treasury Bills and is limited to Qualified Purchasers, USDY is accessible to both retail and institutional investors. OUSG represents fund membership/equity, while USDY is a senior secured loan.

Purpose of Ondo US Dollar Yield (USDY)

USDY combines stablecoin accessibility with USD yield, though U.S. regulatory compliance imposes constraints. Yield accrual begins upon deposit processing, but tokens are minted 40-50 days later, and redemptions are restricted to USD transfers to non-U.S. bank accounts. Unlike OUSG, which targets Qualified Purchasers with tokenized Treasury exposure, USDY serves a broader audience with a distinct legal structure: OUSG is fund-based, while USDY is a secured note.

How Does Ondo US Dollar Yield (USDY) Work?

USDY operates through three key processes: Subscription, Redemption, and Transfer.

Subscription

1. Investment: After onboarding, invest via USDC or USD wire transfer ($100,000+). Yield begins once funds are processed (2-3 business days).

2. Cohort Assignment: Investments are assigned to weekly cohorts (Wednesday to Tuesday), determining token minting dates.

3. Certificate and USDYc Issuance: Within 3 business days of processing, a Temporary Global Certificate is issued, and USDYc tokens are minted as placeholders. USDYc, used for bookkeeping, is burned upon USDY minting.

4. Token Minting: After the Restricted Period (40-50 days), USDY is minted and sent to the designated wallet.

Transfer

Post-Restricted Period, tokens can be freely transferred in eligible non-U.S. regions, usable in DeFi or secondary markets.

Ondo US Dollar Yield (USDY) Use Cases

USDY serves dual purposes:

• USDY: Accumulating; price per token rises, ideal for holding and collateral.

• rUSDY: Rebasing; fixed at $1 with yield as additional tokens, suited for payments.

Usage Steps:

1. Log into the Ondo portal with an email and complete the onboarding questionnaire.

2. Select the USDY product, click “Request Access,” and submit KYC documents.

3. Upon approval, mint or redeem via the USDY portal.

Advantages of Ondo US Dollar Yield (USDY)

• Security: Ondo USDY LLC is bankruptcy-remote from other Ondo entities.

• Yield: Offers Treasury-backed returns, distinct from other Ondo tokens.

• Transparency: Daily price updates and rebasing.

• Accessibility: Available to non-U.S. retail and institutional investors.

Risks of Ondo US Dollar Yield (USDY)

• Collateral Risk: Potential value loss in Treasury Bills or repos.

• Blockchain Risk: Irreversible transactions or forks.

• Smart Contract Risk: Vulnerabilities, despite ChainSecurity audits.

• Liquidity Risk: Market fluctuations.

• Legal Risk: Regulatory changes.

• Exchange Risk: Platform disruptions.

• Trading Risk: Volatility.

• Banking Risk: Fiat transaction issues.

• No Insurance: No deposit insurance.

• Third-Party Risk: Unverified integrations.

• Blocked Addresses: Blacklisting for illicit activities.

• Termination Risk: Inability to redeem post-account closure.

• Inaccuracy Risk: Losses from incorrect addresses.

Ondo US Dollar Yield (USDY) Team

The Ondo US Dollar Yield team comprises Ondo Finance’s founding members. Established by Nathan Allman, a Stanford University graduate in Economics and Business, Ondo Finance reflects Allman’s transition from traditional finance to crypto, driven by a vision to innovate. Allman founded Ondo to bridge decentralized and traditional finance.

Official Links

• Website
• X (Twitter)
• Whitepaper

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