In the past few days, Bitcoin has experienced a rebound, which makes one start to question: what exactly has happened? Has the bear market ended? Will it break new highs again?
But don't worry! I believe that for an asset to truly enter a sustainable bull market, whether it's Bitcoin or stocks, there is only one core factor (liquidity).
Now that Bitcoin has bounced back from 80K to 90K, many people might wonder: has the bear market ended? Is it time to chase some momentum and see 100K or even higher?
One major reason for Bitcoin's rise this time is the huge shift in market expectations regarding interest rate cuts, from originally believing that there would be no cuts to now believing that the likelihood of cuts is very high.
However, Bitcoin's price fluctuations mainly depend on liquidity. And now the market is buying the news: we are going to cut rates, QT is going to end on December 1, liquidity is coming back.
So many people have started to think: maybe this time it’s not so bad, maybe like the last time QT ended, buying the dip will make a profit. To be honest, those buying in this mindset are likely walking into a trap.
How is this narrative constructed?
Looking back, when the market only gave a 25% probability of a rate cut in December, almost everyone thought there wouldn’t be one. I predicted at the time: there will be a cut, and the Fed will turn dovish.
The reason is simple: they want to stabilize market sentiment as much as possible before the quiet period.
The result is that Federal Reserve officials have started to publicly say: the job market is deteriorating, and rate cuts are becoming necessary. So the market begins to believe the Fed has turned dovish, QT is about to end, and liquidity is returning. Bitcoin will naturally rise.
But the problem is: the market reacts to expectations, not reality.
Speaking of structural aspects, by the end of October, obvious signs of liquidity tightening began to appear in the U.S. repo market. SOFR (Secured Overnight Financing Rate) soared to 4.22% on October 31, breaking not only the Fed's 4% upper limit but also far exceeding the 3.9% that banks can earn on reserve deposits.
This indicates that institutions are fiercely competing for cash, rather than borrowing money easily. Meanwhile, banks are starting to heavily utilize the Fed's standing repo facility, with daily usage exceeding $50 billion, the highest record since this facility was established in 2021, and the largest overnight rescue scale since the liquidity crisis in 2020. It should be noted that SRF is an emergency tap, not a daily tool. Institutions usually avoid using it because it indicates you are out of money, which has a clear stigma effect. But when it is used extensively, it shows that liquidity pressure has become severe enough that they can’t even care about appearances.
And this happens against the backdrop of: reverse repo funding pools are nearly depleted, bank reserves continue to decline, the Treasury is issuing a large amount of debt to drain liquidity, repo rate fluctuations are intensifying, so this is not liquidity easing, but a signal that liquidity is beginning to tighten.
The delinquency rate of loans related to U.S. office buildings has exceeded 11%-12%, higher than the peak during the 2008 financial crisis. Some high-risk areas are even approaching high double-digit levels. This means that more and more commercial real estate is depreciating and losing its financing capacity. Meanwhile, the private credit system is taking on more and more risk assets.
So what we are facing now is:
1. Liquidity tightening
2. Collateral quality declining
3. Leverage remains high
4. Rising cost of capital
This is a classic double whammy, a paradigm shift that the market has yet to realize; the market is still viewing issues through the lens of 2020-2021: rate cuts = liquidity flood.
But this time is different; stopping QT and cutting rates will not automatically create an environment of liquidity flood; it merely slows down the tightening. And when liquidity and collateral are both under pressure, the system's reaction is not rapid expansion but a gradual exposure of risks. Plus, with Japan's potential interest rate hike and the reverse unwinding of yen carry trades, once funds flow back to Japan, it could likely trigger a renewed de-leveraging of global risk assets.
I think this rebound in Bitcoin is dangerous? Bitcoin is rebounding, but its rebound is based on hope, not structural repair.
I hope the Fed will save the market again.
I hope liquidity will return immediately.
I hope this round is the same as the past.
But hope is not a financial structure; logically speaking, if by the end of December the market finds that liquidity has not materially improved, the possibility of Bitcoin falling below 60K again is not low. This sounds contrary to mainstream views; when most people see Bitcoin rebounding, they believe the trend has turned back upward.
Rising prices + tight pipelines = fragile increases! Prices can rise, but liquidity is deteriorating, and eventually, liquidity will win.
Cautiously buy the dip! #BTC走势分析 $BTC
