In the early morning, Bitcoin suddenly plummeted, leaving many investors bewildered. How could it fall so sharply when everything seemed fine? In fact, the logic behind this crash is clear, rooted in the liquidity squeeze that has triggered capital flight, which many have overlooked.
The first key driver is the U.S. Treasury auction, the 'blood extractor.' Currently, the government is in a shutdown, and the TGA (Treasury General Account) has long run dry, putting the market in a state of liquidity scarcity.
Although the Federal Reserve has tried to inject funds from the banking side to provide relief, the 'black hole' of the bond market has absorbed much more capital than expected: this time, the nominal scale of the three-month and six-month U.S. Treasury auction was 163 billion, but the actual reached 170.69 billion. After subtracting the Federal Reserve's reinvestment portion, the financial market was drained of 163 billion in a short time.
This wouldn't be a big deal in a liquidity easing phase, but during a tightening cycle, large capital withdrawals are enough to make risky assets collapse — the decline in Bitcoin is a direct reflection of capital outflow, akin to a person losing too much blood and feeling dizzy. With no funds to support the market, it naturally cannot hold up.
The second pressure comes from the Federal Reserve's 'hawkish cold air.' Goolsbee's latest remarks continue to lean hawkish, directly extinguishing the market's expectations for a rate cut in December, causing the probability of a rate cut to plummet from nearly 70%.
It should be noted that rate cut expectations have always been a 'stimulant' for risky assets. Now that these expectations have weakened, the short-term market is directly doused with cold water, significantly amplifying selling pressure.
With liquidity tightening and sentiment cooling, two mountains weigh down on risky assets, making it hard for them to raise their heads; Bitcoin, as a highly volatile asset, is naturally at the forefront.$BTC $BNB $ETH #WIF #BTC #Write2Earn #Binance #ElonMusk65908 Follow For More!
The first key driver is the U.S. Treasury auction, the 'blood extractor.' Currently, the government is in a shutdown, and the TGA (Treasury General Account) has long run dry, putting the market in a state of liquidity scarcity.
Although the Federal Reserve has tried to inject funds from the banking side to provide relief, the 'black hole' of the bond market has absorbed much more capital than expected: this time, the nominal scale of the three-month and six-month U.S. Treasury auction was 163 billion, but the actual reached 170.69 billion. After subtracting the Federal Reserve's reinvestment portion, the financial market was drained of 163 billion in a short time.
This wouldn't be a big deal in a liquidity easing phase, but during a tightening cycle, large capital withdrawals are enough to make risky assets collapse — the decline in Bitcoin is a direct reflection of capital outflow, akin to a person losing too much blood and feeling dizzy. With no funds to support the market, it naturally cannot hold up.
The second pressure comes from the Federal Reserve's 'hawkish cold air.' Goolsbee's latest remarks continue to lean hawkish, directly extinguishing the market's expectations for a rate cut in December, causing the probability of a rate cut to plummet from nearly 70%.
It should be noted that rate cut expectations have always been a 'stimulant' for risky assets. Now that these expectations have weakened, the short-term market is directly doused with cold water, significantly amplifying selling pressure.
With liquidity tightening and sentiment cooling, two mountains weigh down on risky assets, making it hard for them to raise their heads; Bitcoin, as a highly volatile asset, is naturally at the forefront.$BTC $BNB $ETH #WIF #BTC #Write2Earn #Binance #ElonMusk65908 Follow For More!