Recently, the actions of the Federal Reserve have been hard to interpret—on one hand, expanding its balance sheet and injecting liquidity, and on the other, paving the way for interest rate cuts. What exactly are they doing? Could this become a catalyst for the crypto market?

First, let's talk about bond purchases. Market news indicates that the Fed plans to buy approximately $220 billion worth of short-term government bonds over the next 12 months. This isn't a new policy; it was officially initiated at the December meeting. The reason is straightforward—liquidity in the financial system is a bit tight, with reserve levels dropping below "moderately ample," so they need to replenish. The current pace is about $40 billion per month, with two intensive operations scheduled for January 2026. In plain terms, money is starting to flow back into the market.

On the interest rate front, the door for cuts is also open. From the minutes of the Fed meeting, it’s clear that most policymakers support the rate cut decision in December, and they generally believe that as long as inflation continues to decline, further cuts will follow. Although there are some disagreements about the pace of rate cuts internally, the overall shift toward easing is already set in stone. Now, it all depends on inflation data giving the "green light."

What about the economy? Participants are generally optimistic about growth in 2026. The minutes mention that many officials forecast the economy will accelerate in 2026, with mid-term economic activity approaching potential output. Fiscal policy, regulatory adjustments, and a favorable financial market environment are expected to support this. However, to be honest, their forecasts for actual GDP growth are not entirely certain, and opinions vary. Some believe technological progress can drive growth, while others worry it might impact employment.

Getting back to the core question: how will this "balance sheet expansion + rate cuts" combo from the Fed affect the market? Liquidity expectations are definitely set to be triggered. Does this mean the broad easing cycle of 2026 might actually start earlier? Many are adjusting their investment allocations to see if there are opportunities. What do you think? Should the strategy for 2026 be adjusted accordingly?