"Woke up to find my account short a car" "Who held on last night? I cry first as a tribute" This morning, opening the market software, I estimate that many friends in the crypto circle feel colder than tap water in winter. The sudden drop at three in the morning swallowed up most of the gains that were hard-earned last week, and the comments are filled with curses against the 'dog farm controlling the market.' But as someone who has been watching the market for eight years, I must say: this time it is really not the traders' fault; the 'blood extractor' behind it is ten times harsher than the traders!
To understand this drop, you must first remember one word: liquidity. This thing is simply the 'live money' in the market. When there is more live money, the market has support; when the live money is withdrawn, not to mention Bitcoin, even gold has to kneel. The 'culprit' behind this withdrawal of live money is the U.S. Treasury auction, which has recently been an unreasonable 'blood extractor.'
First, let me give you some background: things are a bit chaotic with the US government right now. The Treasury's 'money bag' (TGA account) has long hit bottom, and the market is like a nearly drying pond, with little grain left. Although the Federal Reserve is trying to inject money into banks for emergency relief, the speed at which the bond market, this 'black hole,' absorbs money is faster than the Federal Reserve can print it.
In this recent three-month and six-month Treasury auction, they superficially claimed they would sell $163 billion, but the actual transaction skyrocketed to $170.69 billion. Did you think that was the end? After deducting the portion bought by the Federal Reserve, it’s equivalent to directly pulling $163 billion out of the financial market! What does this mean? It’s like suddenly inserting a large straw into a pond that was already low on water, nearly sucking it dry.
When the market is good, this amount of money might not even make a splash, but now it's the 'cold winter' of liquidity tightening! Risk assets, which are already like a weak patient, suddenly have so much blood drawn that it’s surprising they aren’t fainting. Bitcoin, as the 'prominent asset' in risk assets, is the first to be struck down. This is a normal reaction due to the market's lack of funds to support it; it has nothing to do with market manipulators. If any manipulator dared to strike like this, they would have long been trapped in a liquidity trap.
If the Treasury auction is a 'hard knife,' then the Federal Reserve's hawkish speeches are 'soft knives.' The combination of the two has pierced through the market. Yesterday, Chicago Fed President Goolsbee's remarks were like a bucket of ice water thrown on the market, openly and covertly saying, 'Don’t expect rate cuts in December.' Once this statement came out, the originally nearly 70% expectation of rate cuts plummeted, and the market instantly wilted.
I often tell my fans that the expectation of interest rate cuts is the 'shot in the arm' for risk assets. Everyone was hoping for a 'cure,' but then the doctor suddenly says, 'This medicine is off,' how can sentiment not collapse? It’s like you’ve already bought a plane ticket to Sanya for vacation, and just before departure, you’re told that a typhoon has come and all flights are canceled. That feeling of disappointment is just like what today’s investors are experiencing.
On one side, real money is being withdrawn, and on the other side, market sentiment is being dampened. With these two heavy burdens pressing down, how can Bitcoin not fall? What's worse is that the cryptocurrency market has always been prone to 'chasing highs and cutting losses.' As soon as there's a decline, many panic and sell off their assets. When the selling frenzy hits, the downward trend naturally intensifies. But to be honest, those who are panicking and selling are merely falling into the trap of market sentiment.
As an old player, I actually think now is a good time to see the direction clearly. This drop is not a trend reversal; it’s just a temporary 'jam' in liquidity. The signal for breaking through is very clear: as long as the US government returns to normal operations, the Treasury's coffers can be replenished, which is like adding water to a drying pond; liquidity will surely recover. Moreover, even if the government remains inactive, as long as the Federal Reserve eases up a bit and reduces short-term fund recovery, market pressure can also be alleviated.
Remember, liquidity is like the changing of the seasons; there is never an eternal winter. The liquidity exhaustion in 2020 was much worse than now, but in the end, didn’t we still welcome a big rebound? The tougher the market is now, the easier it is to filter out the 'followers' and leave behind those who truly understand the logic.
Finally, let me say something from the bottom of my heart: when trading cryptocurrencies, don't just focus on the red and green fluctuations on the K-line chart. Those seemingly unrelated factors like US Treasuries and Federal Reserve policies are the real 'behind-the-scenes bosses' that determine the market trends. I share the latest liquidity data and policy interpretations in the comments section every day.
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