This is serious! The $12.6 trillion reservoir of funds on Wall Street is about to run dry. The Federal Reserve must step in tonight; otherwise, both the crypto market and stock market will suffer greatly by the end of the year, and that long-standing threat may finally explode! Many major Wall Street banks have issued warnings overnight, stating that the U.S. money market is on the verge of collapse. This $12.6 trillion fund pool is more than the total market value of the top ten companies globally. Once it collapses, the global market will be affected.
Let me explain to everyone why we are so anxious right now.
The banks' reserves are running low. It's like ordinary people not having money and having to borrow everywhere in emergencies; banks now have no money to lend, and the market naturally becomes very anxious.
The cost of borrowing money is also getting higher. Previously, the interest rate for borrowing might have only been 1%, but now it’s getting more expensive, and businesses and institutions are struggling to cope.
This is the first time since the Federal Reserve stopped tightening after the tapering that we are facing such a severe liquidity crisis. No one has experienced this, and we are even more uncertain and anxious.
Let's take a look at these alarming figures. The total scale of the money market is $12.6 trillion, which is more than the combined market value of large companies like Apple and Microsoft. The usage of overnight reverse repos has plummeted by 85%. Simply put, everyone has no spare cash to save, and market liquidity has completely dried up. How much money is the market lacking now? A conservative estimate is $300 billion to $500 billion, which is equivalent to the total GDP of a medium-sized country!
So why is there a liquidity crisis? Ultimately, it's because there is too much demand for money and too little supply. At the end of the year, banks are assessed and want to make their books look better, so they are reluctant to lend money. The U.S. government is still frantically issuing bonds to raise funds, which has withdrawn a significant amount of money from the market. Global dollars are flowing back to the U.S., but it's still not enough. Even the funds in the cryptocurrency market have been significantly withdrawn, with a lot of money taken out of the crypto space for urgent needs.
At 2 a.m. tonight, the Federal Reserve's meeting is essentially a rescue conference that must answer three key questions. First, should we buy government bonds to inject liquidity? Second, if we do buy government bonds, should we buy long-term or short-term ones? Third, how can we improve existing borrowing tools?
This matter cannot be underestimated! A similar crisis occurred in September 2019, when the overnight borrowing rate suddenly soared to 10%, causing many businesses to go bankrupt and the stock market to crash. Many indicators are now similar to that time. JPMorgan directly stated: This is not a small issue; a major shift in monetary policy is needed! Bank of America also stated more straightforwardly: Powell must provide a clear statement tonight; otherwise, the market will collapse on its own!
There are only 8 hours left until the meeting. Powell not only has to announce whether or not to cut interest rates but also needs to come up with concrete measures to stabilize the market. This year-end exam will directly determine the opening of the crypto market and stock market next year. If the rescue measures are strong enough, market liquidity will ease, and assets like Bitcoin and Ethereum will definitely rise; if no reliable measures are provided, the market will panic sell, and we need to be prepared in advance.
Tonight, I will stay up late watching the live broadcast of the Federal Reserve meeting and will interpret how the rescue plan affects the crypto market and the trading opportunities for Bitcoin and Ethereum. Friends who want to bottom-fish or hedge, come to the chat room; tonight's news will directly determine whether we can make big money next year!
