During the final trading days of the year, a type of chart that typically goes unnoticed by those outside the finance sector started to draw attention again.
Banks rushed into the Fed’s Standing Repo Facility, borrowing an unprecedented $74.6 billion on December 31 for 2025. Overnight funding rates surged, with the benchmark SOFR briefly reaching 3.77% and the general collateral repo rate peaking at 3.9%.
Overnight REPO Chart (Source: NY Fed)
Related Reading
Banks just demanded $26 billion in emergency cash but Bitcoin traders are missing a critical warning signal
Year-end pressures tested the central bank’s “ample” reserve theory, creating a dichotomy for risk assets in January.
Dec 31, 2025 · Liam ‘Akiba’ Wright
If you are active on crypto Twitter/X, those figures quickly transform into a narrative about everything. About concealed leverage, banks quietly faltering, the Fed patching it up, the same storyline unfolding once more.
Then an older video gets circulated, the September 2019 repo spike, which still serves as a forewarning. Someone will share a chart, another will highlight the date, and within minutes, the question arises again in numerous forms.
Chart shared on social media linking the September 2019 repo market spike with the onset of COVID-19 and later banking stress. (Source: FinanceLancelot)
Did repo falter in 2019, did COVID arrive right on cue to mask it, did the entire situation rewrite the playbook that now influences crypto liquidity?
The concise answer is that “prove” is a weighty term, seeking evidence that this week’s plumbing distress cannot substantiate.
The more intricate answer is fascinating, as the timeline fueling the theory holds real, documented truths, and those truths are significant for 2026, for markets, and for crypto holders who believe they are wagering on technology when they are frequently betting on dollar liquidity.
The repo spike that never truly disappeared
Repo simply refers to short-term borrowing, cash for a day, secured by collateral, often Treasuries. It is the type of situation that seems mundane until it fails, and then suddenly it becomes the sole focus.
In mid-September 2019, the U.S. repo market did experience a breakdown, at least temporarily. Funding rates spiked dramatically, the Fed had to intervene, and the incident alarmed people as it occurred during a time expected to be stable.
The Fed later released a comprehensive explanation of the incident, pointing to a buildup of cash drains, corporate tax payments, Treasury settlements, and a system that had less flexibility than it seemed.
The Bank for International Settlements analyzed the same situation and questioned whether it was an isolated event or indicative of a deeper structural issue.
The New York Fed also published a more detailed paper discussing “reserves scarcity and repo market frictions” as contributing factors, found in this Economic Policy Review paper.
The Office of Financial Research subsequently delved even deeper, examining intraday timing data and the specifics of those spikes in an OFR working paper.
That’s a considerable amount of institutional documentation for something that many people only recall as a peculiar anomaly.
The takeaway was straightforward: markets that seem liquid can still freeze, because liquidity is not merely a feeling; it constitutes a network of conduits. When everyone requires cash simultaneously, those conduits become crucial.
The COVID timeline that raises suspicions
The other aspect of the theory involves the pandemic timeline and the sentiment that the public was not provided the complete narrative in real time.
There exists a clear anchor that nearly everyone acknowledges: on December 31, 2019, the WHO China Country Office was alerted to cases of “pneumonia of unknown cause” in Wuhan, mentioned in the WHO’s initial situation report, Sitrep-1.
There is also an anchor from the U.S.; the CDC’s timeline identifies the first laboratory-confirmed U.S. case as occurring on January 20, 2020, according to the CDC museum timeline.
Between those dates lies a chaotic phase, when rumors spread faster than organizations could verify anything, the period when online clips circulated, now reassessed through the lens of what we later learned.
Even mainstream medical journalism captured the tension, including the account of Dr. Li Wenliang, who reported being reprimanded for alerting colleagues early, as detailed by BMJ.
If you aim to comprehend why a “cover story” narrative takes hold, this is where it takes root, in the gap between early indicators and official validation, and in the recollection that information seemed controlled.
This does not establish proof of intent but creates fertile ground for intent, which are distinct concepts.
What this week’s spike reveals
Let’s return to the present and maintain focus.
This week’s repo situation was not an unforeseen overnight explosion like that of 2019. It appears to be year-end tension, balance sheets tightening, cash being hoarded, and banks opting for the Fed’s backstop because it was more economical and straightforward than fighting for funding in the market.
That is precisely how the Fed intends for this tool to function.
Indeed, the Fed has been facilitating the use of the backstop. On December 10, 2025, the New York Fed announced that standing overnight repo operations would no longer have an overall operational limit, as stated in an official operating policy announcement.
This is significant because a repo spike in 2026 no longer equates to a repo spike in 2019.
Previously, the sense of urgency stemmed in part from surprise, with debates over what was malfunctioning and how close the system was to exhausting usable reserves.
Now, the playbook is clear, and the Fed has been encouraging banks to utilize the standing facility actively, so it no longer feels like a panic mechanism.
Reuters reported on the record borrowing on December 31 and the simultaneous activity in the Fed’s reverse repo tool in this article.
So what does this week’s spike convey, in simple terms?
It indicates that dollar funding continues to tighten around predictable calendar events, and the system still relies on the Fed, which is increasingly at ease with being relied upon.
It suggests that the “plumbing” issues never ceased; they simply evolved.
The aspect conspiracy theories get right, and the part they overlook
If someone asserts that the repo market was signaling distress before the world had fully acknowledged COVID, that is accurate in the most straightforward chronological sense.
September 2019 stress predates December 2019 COVID alerts; the Fed itself documents the September incident in the Fed Notes, and the WHO’s first formal notification anchor is found in Sitrep-1.
Where the theory diverges from the evidence is in the leap from “repo stress was present” to “a systemic collapse was in progress and required cover.”
The 2019 repo episode has well-argued, well-sourced explanations, including reserves distribution, balance sheet limitations, and predictable cash drains that impacted more severely than anticipated, covered by the Fed, the BIS, and the New York Fed’s own research.
None of those sources frame it as a derivatives collapse beginning to emerge. This does not imply concealed leverage does not exist; it means the public record first points to plumbing stress.
There is also a subtler nuance here that gets lost in the more sensational narratives.
The Fed’s repo presence on its balance sheet can resemble “the repo market spiking,” even though it is in actuality “the Fed’s intervention being utilized.”
The data and the narrative can coexist, yet still describe distinct phenomena.
If you wish to observe it yourself, the New York Fed publishes daily operational results on its Repo Operations page.
Thus, the best way to interpret this without exaggerating is straightforward.
The coincidence is genuine, the causation remains unproven, and the plumbing risk is still pertinent.
Why crypto should take notice, even if you disregard repo
This is the section that clarifies why these matters consistently seep into discussions about crypto.
Most crypto holders have experienced at least one cycle where everything seemed stable, only to find that a few days later, every chart was plummeting simultaneously: Bitcoin, tech stocks, meme coins, and the stablecoin balance you thought was “secure” suddenly became the only assets you wanted to hold.
That is liquidity, and repo is one of the venues where liquidity manifests itself.
Stablecoins represent another.
In December, the total stablecoin supply hovered around $306 billion, according to DefiLlama. An increasing stablecoin float can imply more dry powder held on-chain; it can also signify that people are de-risking while remaining in the market, akin to how traders in traditional markets transition into cash-like assets.
When repo becomes volatile, and banks begin seeking short-term funding from the Fed, it serves as a reminder that the “dollar” is not merely a figure in your banking application. It constitutes a system of conduits, collateral, and overnight commitments.
Crypto operates atop that system, even when it pretends otherwise.
The forward-looking perspective, what 2019 taught the Fed, what 2026 might impart to crypto
The clearest takeaway from 2019 is that the Fed did not appreciate being caught off guard.
It established backstops, normalized the notion that it would actively manage reserves, and formalized repo support.
This December change, eliminating the aggregate limit on standing overnight repo operations, exemplifies this.
In 2026, this creates several scenarios that are significant for crypto liquidity.
Scenario one, the plumbing remains managed
Repo stress emerges around tax deadlines and quarter closings; the Fed backstop absorbs it; rates stabilize; risk assets continue to trade based on macro data and earnings. Crypto remains the higher-beta version of risk-on/risk-off, and stablecoins continue to expand as they are the most convenient option for global traders to park dollars without leaving the rails.
Scenario two, the calendar stress becomes habitual
If large withdrawals from the standing repo facility occur repeatedly outside the regular calendar culprits, and if SOFR frequently appears to be testing its upper limits, it indicates that the private market is increasingly leaning on the Fed for an extended period.
This is not necessarily a crisis, but it does increase the likelihood that liquidity conditions will shift faster than crypto holders anticipate.
You can monitor SOFR daily, and you can track overnight reverse repo usage on FRED; the figures will inform you when cash is being hoarded and when it is being made available.
Scenario three, the backstop becomes the market
If the Fed’s role continues to expand, and market participants increasingly route their funding requirements through official channels, the “free market” price of short-term dollars becomes less significant, while the policy-managed price gains greater importance.
Crypto traders already exist in a similar environment, where on-chain funding rates, exchange margin regulations, and stablecoin liquidity pools shape the perception of what “the market” feels like.
The more traditional finance operates in this manner, the more crypto cycles begin to resemble macro cycles dressed in different attire.
So, does this week validate the COVID cover story?
If you seek courtroom-level evidence, this week’s repo spike does not provide it.
However, it does offer a clearer perspective on a genuine story that remains under-discussed.
The system exhibited fragility in September 2019, as documented by the Fed in Fed Notes, analyzed by BIS, and investigated by the New York Fed in research.
Then the world entered a pandemic, with an official alert timeline anchored by the WHO on December 31, and a U.S. confirmation anchored by the CDC on January 20.
These facts sufficiently explain why individuals connect the dots and why those connections feel emotionally satisfying, particularly for anyone who witnessed the world transform while official messaging lagged and the financial system was quietly supported on a large scale.
The more pertinent question for crypto readers is the one that endures beyond the debate about motives.
If repo plumbing can still tighten unexpectedly, and if the Fed is increasingly constructing a framework where that plumbing operates through its own facilities, then crypto liquidity will persist in trading as a shadow of the dollar system, even when the narrative claims independence.
If you want to comprehend the next crypto cycle, it is crucial to observe the pipes and to remain honest about what those pipes can substantiate.
The post Shock $74B emergency bank loan on NYE just revived the dark “COVID cover-up” secret bailout theory appeared first on CryptoSlate.
Comments are closed.