Fed Under Fire for Silent Liquidity Surge as RRP Plunges 94%

YEREVAN (CoinChapter.com) — The Federal Reserve has not said anything officially. But many analysts believe it is quietly adding money into the financial system.

They say this because the Reverse Repo Facility, which is one of the Fed’s tools, has dropped a lot. In 2022, the balance was more than $2.5 trillion. By April 2025, it fell to just $148 billion. That’s a 94% drop.

This facility lets banks and financial companies park their extra cash with the Fed overnight in exchange for Treasury securities. When the balance goes down, it usually means that the cash is no longer sitting with the Fed—it’s moving back into the markets.

That’s why analysts say the Fed is quietly adding liquidity—which means more money is entering the system. They compare it to Quantitative Easing (QE), where the Fed buys assets to push money into the economy. But this time, the Fed hasn’t officially announced anything.

“This isn’t hopium. This is actual liquidity being unchained,”

wrote Oz, founder of The Markets Unplugged. The fall in Reverse Repo suggests funds are re-entering the market.

RRP Near Empty, Market Faces Uncertain Tailwind

With the Reverse Repo Facility almost drained, analysts are debating what comes next. An options trader said the remaining balance is too low to offer continued support.

“Decline in RRP adds liquidity to the market. There is not much left in the RRP account meaning that it can’t provide much liquidity. There will be a short relief rally but no new ATHs this year.”

the trader said.

Still, Oz argued that the previous liquidity surge might keep supporting risk assets. But with the Reverse Repo nearly dry, further liquidity will need new sources.

Data from FRED shows big changes in the Reverse Repo balance last month. Between March 17 and April 1, 2025, the balance went up fast—from $94 billion to $379 billion. Then, it dropped just as quickly, falling to $166 billion by April 7.

This sharp move up and down means the Fed was likely very active for a short time. The increase may show that banks or financial firms were using the Fed’s facility more, possibly because of stress or fear in the market. After that, the drop suggests that the money moved back into the financial system.

This pattern supports what some analysts believe—that the Fed is quietly closing down the Reverse Repo Facility without saying it out loud. These quiet changes in Fed liquidity may already be having an effect on the market. During this same time, Bitcoin lost over $500 billion in total market value.

Trade War Moves Hit US Treasuries and Raise QE Risk

Tensions between the US and China are rising again. Last week, Chinese Foreign Ministry spokesperson Lin Jian said Beijing would “fight to the end” against Trump’s proposed tariffs, which now reach up to 104% on some Chinese goods.

Peter Duan, a market analyst, linked Trump’s tariff move to bond market pressure.

“Trump forces tariff wars to lower the 10Y Treasury rate… China dumps US Treasuries to push yield up,”

he wrote.

The United States needs to pay back or replace $6.5 trillion in debt soon. To do that, the government usually sells new Treasury bonds. But when interest rates (yields) go up, it becomes more expensive to borrow money.

China is selling its U.S. Treasury bonds, which pushes those yields even higher. This makes it even harder and more costly for the U.S. to refinance its debt.

Because of this, many believe the Federal Reserve may need to take action.

Bitcoin Drop Follows Fed Liquidity Signals

Since April 2, 2025, Bitcoin has seen a major decline. Its price fell below $75,000, wiping out more than $500 billion in total market value. The chart from TradingView shows a strong downward trend starting in early April, with sharp red candles and increased trading volume.

On April 3–5, Bitcoin’s price dropped quickly from above $81,000 to under $74,000. This marked one of the steepest drops in recent weeks. The price attempted a rebound on April 6–7 but failed to move above the 50-period EMA, which is currently around $80,544.

By April 9, the price hovered around $76,488, showing some recovery but still trading below key resistance levels. The 4-hour candles also show high selling pressure during the drop, with volume spikes confirming strong market reactions.

Altcoins dropped even more than Bitcoin, reacting to both the liquidity decline and fear around inflation, tariffs, and global debt stress. While Bitcoin’s price tried to stabilize, the broader crypto market continued to show weakness.

The near depletion of the Reverse Repo Facility is being described by some market participants as the clearest signal of a stealth easing cycle. Analysts tracking daily flows note that liquidity released from the facility is beginning to mirror the pace and market effect of previous Quantitative Easing programs, despite no official change in Fed policy language.

The change in RRP balances has also been accompanied by a surge in short-term Treasury bill demand, as newly available cash seeks low-risk returns. This behavior points to institutional money being re-deployed from the Fed facility into the bond market and equities.

Analysts Warn Fed Must Act or Risk Market Shock

The Conscious Trader, an analyst on X, warned that the Fed faces two outcomes.

“Either way, a pullback is coming: If markets break first, the sell-off sets the stage for QE. If QE starts first, Smart Money sweep the lows before liquidity pumps risk assets higher.”

he said. He explained that if markets fall first, QE could follow. If QE begins first, institutional buyers might act early.

 Still, with the Reverse Repo Facility near zero, the liquidity channel appears nearly exhausted.

Bitcoin, altcoins, and risk assets show signs of reacting to these silent changes. Some analysts say the current liquidity boost may not continue unless new tools are activated.