Brothers! The excitement in the financial circle tonight is even more intense than during the New Year! If you are still fixated on that 25 basis point rate cut, you are really missing out. The real drama is not about the interest rates; it's about the big moves the Federal Reserve is about to make with its balance sheet! If this really happens, the stagnant waters of the crypto market are bound to be stirred up, and it might even trigger a major storm!
First, let me briefly explain to the new friends, and the veterans shouldn't rush to scroll away; the key points are coming later. Recently, the market's expectations for interest rate cuts have almost been overhyped, and the CME Federal Reserve watch shows that the probability of a 25 basis point cut is nearing 90%. But in my view, this is simply a given; the market has already digested this expectation quite a bit. Just like in our crypto circle, when good news is announced, prices might actually drop. If we really wait for the official announcement of the rate cut, there might even be a short-term pullback because, after all, everyone knows the good news, and that doesn't count as real good news.
What is truly worth our sleepless nights watching the market is the reserve management purchase framework that the Federal Reserve will launch after ending the QT cycle on December 1. Some might say, isn't this just a different way of buying government bonds? This statement is only half true; the key lies in the liquidity issues behind it. After such a long period of balance sheet reduction, bank reserves are nearing their bottom, and overnight financing rates have exceeded the policy interest rate ceiling several times. It's like the funding pool in the crypto market is nearly dry; even a slight transaction can lead to significant price fluctuations, which essentially signals a lack of liquidity.
The Federal Reserve's shift to RMP, in simple terms, is changing from tightening to easing, and this easing may continue until early 2026. The market has two views on the scale of easing: conservatives believe that $35 billion of short-term government bonds will be purchased monthly, resulting in a liquidity injection of $420 billion over the year; radicals, on the other hand, believe this scale is insufficient and that at least $45 billion should be bought each month to bring bank reserves back to a safe level. Don't think these numbers are far from us; one of the core driving forces of the crypto market is global liquidity. History has shown that every time the Federal Reserve initiates liquidity expansion, assets like BTC experience a significant surge, as liquidity is fuel, and crypto assets are the easiest to ignite.
I personally lean towards the radical perspective. Just look at the current market environment; the liquidity squeeze in the financial system is no secret, and the usage of standing repo facilities has surged to its second-highest level since 2020, indicating that the entire market is short on cash. If the Federal Reserve only dabbles in buying government bonds, it won't solve the problem at all. Moreover, looking at historical patterns, the Federal Reserve has always tightened until problems arise before shifting to easing; they surely remember the lessons from 2019 when the repo market rates soared due to a shortage of reserves.
Some brothers might ask, what impact does this have on the crypto market? Simply put, it means money is coming. The Federal Reserve is beginning to expand its balance sheet, and a large amount of dollar liquidity will flood into the financial market. This money won't just stay in the traditional stock and bond markets; a portion will definitely flow into high-risk, high-return markets like crypto, as capital is always profit-driven. On-chain data shows that although market sentiment is currently low, with nearly 6.5 million BTC in a state of loss, large wallets are quietly accumulating, and exchange balances are also decreasing, indicating that smart money is already positioning itself. Once liquidity signals are clear, this capital could very well ignite the market.
Remember, in the crypto market, those who make big money are always the ones who understand macro trends, and I am the analyst who helps you clarify complex trends! Follow me @大毛淘金 , 👉 in the chat room so you won't get lost! #美联储降息 #ETH走势分析 #美联储FOMC会议
