The market suddenly warmed up today.

The direct reason? The Federal Reserve officially hit the pause button on quantitative tightening. The timing itself carries a strong signal—funds are no longer so tight, so risk appetite naturally picks up.

Something else happened during the day: the Fed injected about $1.35 billion into the banking system through overnight repo operations. This is one of the largest single-day liquidity injections since the pandemic. However, don’t mistake this for “easing.” Overnight repos are more like an emergency rescue move by the Fed when the banking system’s liquidity suddenly jams up—a “crisis response,” not a sign of “easing.”

So what’s the real key to loosening financial conditions? The answer is SLR—the Supplementary Leverage Ratio.

Put simply, the SLR sets a ceiling on banks’ balance sheets. If this metric isn’t relaxed, banks can’t expand their balance sheets, can’t absorb more US Treasuries, and certainly can’t keep up with the Treasury’s ongoing debt issuance needs. The result: systemic pressure keeps building up, and the Fed is forced to repeatedly intervene with liquidity support whenever things get tight. The market ends up stuck in a cycle of “tension—liquidity injection—tension again,” never really achieving sustained easing.

This round of gains in the crypto market is, at its core, more of an emotional reaction to the “end of quantitative tightening”—the liquidity environment hasn’t genuinely improved.

The core driving force behind digital asset price trends still depends on whether US dollar liquidity truly returns to an easy mode. But in reality: quantitative tightening may have stopped, but the SLR remains in place, overnight repos are still just short-term emergency measures, fiscal supply pressure persists, and the banking system overall remains tight. In other words—liquidity hasn’t truly turned around.