Brothers, when I saw the Fed's official announcement early this morning that they would officially stop shrinking their balance sheet on December 1st, I almost jumped out of my chair—we've been waiting for this market for three years, and finally the day has come when the tap isn't turned off! But hold on, let me pour some cold water on this: stopping the balance sheet shrinking doesn't mean the printing press is starting up again, so don't get carried away and go all in! As a seasoned investor who learned the hard way in the last cycle, today I'll break down this opportunity in layman's terms to help you seize it safely.
I. What exactly is the "stop shrinking table"? Is the cryptocurrency market about to surge?
To put it simply: Over the past three years, the Federal Reserve has acted like a pump, removing nearly $100 billion in liquidity from the market each month (specifically $95 billion). The water in the cryptocurrency market has become increasingly shallow, making it difficult for the fish to thrive. Now that the pump has stopped, although it hasn't started releasing water yet, at least the water level in the pool won't drop any further! This is the core significance of stopping the balance sheet reduction – the final stage of liquidity tightening.
In the cryptocurrency world, water equals money. Assets like BTC and ETH are like fish in a pond; the more water, the more the fish swim. Historical data confirms this: within six months of the Federal Reserve ending its balance sheet reduction in September 2019, Bitcoin rose from $8,000 to $13,000, an increase of 62.5%. This time, the environment is even more unique: bank reserve requirements are nearing the warning line, the US dollar index may weaken, and the floodgates for capital flowing into high-risk assets are opening.
II. Where are the opportunities? Don't just focus on BTC!
Core assets will benefit first, but don't expect to get rich overnight.
In the initial stages of improved liquidity, large funds will prioritize flowing into high-consensus assets like BTC and ETH. Recent data already shows signs of this: on the day the balance sheet reduction was halted, Bitcoin rebounded by 7% and Ethereum rose by over 8%. However, remember that halting the balance sheet reduction ≠ the start of a bull market; the market needs time to digest expectations. Short-term volatility is inevitable, especially at the end of the year when leveraged liquidations are frequent, making it prone to sharp price spikes and market corrections.
Beware of the "altcoin illusion"; base your investment strategy on fundamentals.
The biggest pitfall for beginners is abandoning BTC to chase small-cap altcoins. While quantitative tightening might indeed boost high-potential sectors like AI and public chains, many projects lack real users and revenue. Once the liquidity boom ends, they'll plummet faster than any other sector. For example, some decentralized AI computing power projects make grand promises, but their mainnets haven't launched and their code hasn't been audited. I've fallen into this trap three times! I recommend keeping altcoin holdings no more than 15% of your total assets and diversifying them across 2-3 sectors with established ecosystem data.
Pay attention to the "hidden water release" signal: RMP program
Many people have overlooked a crucial detail: while halting balance sheet reduction, the Federal Reserve launched a Reserve Management Purchase (RMP) program, injecting $40 billion in short-term Treasury liquidity monthly. This is tantamount to a disguised injection of funds into the market. Although officials emphasize that it is not quantitative easing (QE), it is definitely a potential booster for risk assets!
III. My strategy: Phased entry + dynamic profit-taking
Having learned my lesson the hard way about going all-in, I now resolutely adhere to the "three-step position-building method":
Step 1: Core holdings account for 50%
With BTC and ETH as a floor, there's no need to panic during dips or miss out on rallies. Current on-chain data shows that long-term holders are still accumulating, and exchange BTC reserves have fallen to their lowest level since 2018, indicating that large funds are laying the groundwork.
Step 2: Satellite warehouses are distributed in batches.
The remaining funds will be invested in three installments, with an additional investment every time the price drops by 10%, to avoid buying at short-term highs. For example, if BTC retraces to $88,000 recently, I will add 5% to my position.
Step 3: Reserve enough ammunition to wait for the Spring Festival effect.
Historical patterns show that the influx of year-end bonuses into Asia from the end of January to mid-February each year tends to trigger a "Chinese New Year rally." Keeping 30% cash on hand gives you a greater advantage in accumulating assets during this period.
Profit-taking discipline is even more important: reduce your position by one-third when a single project's profit exceeds 50%, and decisively cut your losses if the price falls below your cost basis by 15%. Don't fall in love with your account; survival in the crypto world is more important than making quick money!
IV. Risk Warning: Don't Forget the Federal Reserve's "Contingency Plan"
The suspension of the balance sheet is a positive development, but the reality is quite different:
Liquidity transmission has a time lag: it may take 6-18 months for the full effects of policies to materialize, so don't expect an immediate surge.
The Federal Reserve may "change its tune": it just cut rates by 25 basis points in December, but the dot plot shows that there is only room for one more rate cut in 2026, and the hawkish attitude will suppress short-term sentiment.
Regulatory black swan events are still ongoing: the new US policy chairman will take office next year, and policy orientation remains a variable.
V. Conclusion: Opportunities are for those who are disciplined.
This liquidity shift presents an excellent opportunity for beginners to learn position management. Remember these three points:
The halt in the decline is a "stop-fall signal," not a "charge signal."
Position size determines mindset; don't let volatility ruin your strategy.
Surviving until the next bull market is more important than how much you earn this time.
The market always offers opportunities, but you can never earn all the money in the world—you can lose it all. Manage your risk carefully and wait for the right opportunity!
