A dangerous signal that crypto sisters must watch out for
Sisters! Today's actions by the Federal Reserve really need to be monitored closely! The liquidity injection just done on December 22, the officials stubbornly say it's not a large-scale monetary easing (QE), but in my view, this is a warning that the market's funding chain is about to snap. Those of us in crypto must not be fooled by appearances!
First, let’s clarify for the sisters who don't understand: this time the Federal Reserve is using a 'repurchase' model, which basically means using government bonds as collateral to temporarily lend some cash to banks in urgent need, and after a day or two, the government bonds are redeemed, and the money returns to the Federal Reserve. Essentially, this is like giving the banking system an 'IV drip' specifically to deal with year-end funding shortages; it's completely different from the previous indiscriminate money printing to stimulate the economy through QE. We need to distinguish this clearly and not blindly shout that a bull market is coming.
But why do I say we need to be vigilant? If we analyze its true purpose, we will understand! It's just three things: first, everyone needs money at the end of the year and is afraid of a large funding gap; second, we need to ensure that the banking system doesn't have problems; third, they've been reducing the balance sheet, and now they need to wrap it up. Plus, with money from money market funds being moved around, banks don't have enough reserves, and they're afraid that short-term interest rates will suddenly spike, causing systemic risk. These pressures, which the officials have not explicitly stated, are the core reasons for this operation.
The most critical signal has arrived! Previously, the Federal Reserve's $40 billion repurchase per month was a routine operation, but now they are actively increasing their intervention, which has long exceeded normal ranges! To be honest, I've been watching the market for so many years, and market anomalies explain problems better than cold data. Now that the Federal Reserve is eager to step in to 'refuel', it indicates that the level of funding tightness in the financial system has exceeded expectations; it just hasn't broken through that layer of glass yet.
For those of us involved in crypto, this is definitely not good news. When funds tighten, risk assets will be the first to be affected. Don't think this is the Federal Reserve propping things up; this kind of emergency operation cannot fundamentally solve the problem. Instead, it's like poking a small hole in a balloon that's about to burst to let out some air. Whether it can stabilize afterward is still uncertain.
In my personal judgment, the market fluctuations will definitely increase in the coming time. Everyone must control their positions well and not blindly chase highs. Remember, the more actively the Federal Reserve intervenes, the more it indicates that the market hides risks we cannot see. Cautious operation is the way to go!
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