The market plunged directly. The Nasdaq futures fell 1.5% right after opening. Bitcoin was even harsher, dropping 6% within half an hour. The screen was filled with green, causing quite a few people in the group to panic.
Some rushed to send messages saying the black swan has arrived, frantically clicking to cut positions. It wasn't until after cutting that they realized this drop was not an accident; it was a clear signal of significant capital withdrawal.
First, let's look at the actions of the Treasury. The U.S. government has been in a shutdown for nearly 40 days, and the TGA account is nearly empty. Last week, over 160 billion in short-term government bonds was issued urgently. The market had to take on real money, and liquidity at the hundred-billion level was directly withdrawn. The stock and currency market was already supported by capital; a drop was inevitable.
Then there’s the Federal Reserve's cooling remarks. A statement about the policy direction has not yet been set, reducing the probability of a rate cut in December from 70% to below 45%. Short-term funds quickly reduced leverage overnight, and a pile of closing positions emerged. The already tight liquidity became even tighter, magnifying the downward trend.
Additionally, there’s hidden tightness between banks. The usage of the Federal Reserve’s emergency liquidity tools has reached a post-pandemic high. Banks are starting to tighten lending overnight. Although the market seems to be flush with cash, active funds are all trapped in government bonds and reverse repos, unable to flow into the stock and currency market.
This drop is not the start of a bear market. Once the government shutdown ends and the Federal Reserve provides warming signals, the withdrawn funds will definitely return. Panicking to cut losses now is just throwing chips at a low point. Holding cash and watching for the oversold leading coins is the rational approach.
The market is never short of volatility; what’s lacking is the calm to see the logic clearly. The previously mentioned position control and not blindly following the trend are most effective at times like this. Once the signal for capital inflow appears, opportunities will naturally arise. Earning in the crypto circle is fundamentally about understanding the fluctuations. @阿二说币
