A few days ago, a friend asked me whether we are entering a full bull market. I thought for a long time and rationally felt that the market has already risen so high without any interest rate cuts. If a significant rate cut comes, won't it take off? Especially considering that next year, when Powell steps down and Trump takes full control of fiscal power, I can't even imagine how wonderful it will be.
Recently, there is a piece of macro information that needs special attention: the Federal Reserve's balance sheet reduction may be coming to an end.
In the past few weeks, several key indicators within the Federal Reserve system have almost simultaneously issued warnings:
1. The spread between SOFR and IORB continues to widen. The cost of funding in the short-term financing market is becoming increasingly expensive, indicating that system liquidity is being rapidly drained. Historically, whenever SOFR has consistently remained above the IORB upper limit, the Federal Reserve usually intervenes early. The last similar situation occurred just before the Repo crisis erupted in September 2019—at that time, the Federal Reserve was forced to urgently stop the balance sheet reduction and restart repurchase agreements.
2. Bank reserves have fallen below $3 trillion. This figure is a critical threshold. In 2019 and 2022, the market validated that as long as it falls below this line, liquidity risk will rapidly magnify in the repurchase market.
3. The repurchase rate (TGCR) briefly exceeds the reserve rate (IORB). This means the market is willing to pay more to borrow cash rather than let funds sit in central bank accounts—indicating that the "cash content" in the system has been drained. In other words: if it shrinks further, it could potentially "blow up the system."
Therefore, the conclusion is very clear: it can no longer shrink. Once the balance sheet reduction reaches a critical point, the Federal Reserve can only stop the reduction or even reverse the expansion. And the "end of balance sheet reduction" often signals the turning point of the U.S. dollar liquidity cycle.
End of balance sheet reduction = reversal signal of the U.S. dollar liquidity cycle; Bitcoin will be one of the earliest and most sensitive beneficiaries in this cycle.
Internally, Powell, Bowman, and Waller have different views on hedging, but the committee is already discussing "the timing of ending the balance sheet reduction" rather than "whether to continue the balance sheet reduction."
So we need to pay attention to the Federal Reserve meeting minutes that will be released later at 2 AM to see if more details can be disclosed, especially in light of the current macro data during the U.S. government shutdown.
Is it a full bull market?
Maybe not yet, but this could very well be the eve of a full bull market.
Recently, there is a piece of macro information that needs special attention: the Federal Reserve's balance sheet reduction may be coming to an end.
In the past few weeks, several key indicators within the Federal Reserve system have almost simultaneously issued warnings:
1. The spread between SOFR and IORB continues to widen. The cost of funding in the short-term financing market is becoming increasingly expensive, indicating that system liquidity is being rapidly drained. Historically, whenever SOFR has consistently remained above the IORB upper limit, the Federal Reserve usually intervenes early. The last similar situation occurred just before the Repo crisis erupted in September 2019—at that time, the Federal Reserve was forced to urgently stop the balance sheet reduction and restart repurchase agreements.
2. Bank reserves have fallen below $3 trillion. This figure is a critical threshold. In 2019 and 2022, the market validated that as long as it falls below this line, liquidity risk will rapidly magnify in the repurchase market.
3. The repurchase rate (TGCR) briefly exceeds the reserve rate (IORB). This means the market is willing to pay more to borrow cash rather than let funds sit in central bank accounts—indicating that the "cash content" in the system has been drained. In other words: if it shrinks further, it could potentially "blow up the system."
Therefore, the conclusion is very clear: it can no longer shrink. Once the balance sheet reduction reaches a critical point, the Federal Reserve can only stop the reduction or even reverse the expansion. And the "end of balance sheet reduction" often signals the turning point of the U.S. dollar liquidity cycle.
End of balance sheet reduction = reversal signal of the U.S. dollar liquidity cycle; Bitcoin will be one of the earliest and most sensitive beneficiaries in this cycle.
Internally, Powell, Bowman, and Waller have different views on hedging, but the committee is already discussing "the timing of ending the balance sheet reduction" rather than "whether to continue the balance sheet reduction."
So we need to pay attention to the Federal Reserve meeting minutes that will be released later at 2 AM to see if more details can be disclosed, especially in light of the current macro data during the U.S. government shutdown.
Is it a full bull market?
Maybe not yet, but this could very well be the eve of a full bull market.