Don't just focus on interest rate cuts! Over in the US, a signal that is a hundred times more significant than a rate cut might be coming soon.
The Federal Reserve just officially stopped "quantitative tightening" on December 1st. Now the money in banks is nearly running out, causing overnight borrowing rates to spike from time to time. In plain terms, they are barely keeping it together.
So, the key point of this meeting is not really the 25 basis point rate cut, but whether Powell will announce a "liquidity injection" plan! In simple terms, it means they are going to start injecting money back into the market.
I believe the market is betting on one thing: the Federal Reserve may initiate what is called "reserve management purchases," which is essentially a "slow version of QE." Former Federal Reserve experts predict that this plan could come as early as January next year, spending $35 billion to $45 billion a month on short-term government bonds. If you do the math, the total liquidity injected in a year could exceed $400 billion!
This is explosive good news for the cryptocurrency market. Once the faucet is turned back on, global liquidity will be revived. Over the past few years, the fluctuations in Bitcoin have been closely related to the Federal Reserve's liquidity injections. Now the trend may be reversing, from "tightening" to "injecting," which undoubtedly lays the pipeline for a major future market.
What should retail investors do? My view is very straightforward: don't get shaken out by the current volatility!
Currently, on-chain data shows that many people are selling their cryptocurrencies at a loss, which is often the "last washout" before a big surge. Once the US confirms the opening of the floodgates, the money will first rush into the places most sensitive to liquidity.
For those holding positions, hold steady and prepare for the new wave of "liquidity injection." For those looking to enter, take advantage of the market still not fully reacting and start positioning gradually.
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