The liquidity crisis in the U.S. financial market is intensifying, and the cryptocurrency market continues to decline!

Recently, two important interest rates in the U.S. financial system have risen abnormally:

Effective Federal Funds Rate (EFFR): 4.10%, after interest rate cuts it is 4.08%

Overnight Financing Rate (SOFR): 4.29%, after interest rate cuts it is 4.14%

EFFR is the interest rate for unsecured borrowing between banks in the federal funds market;

SOFR is the borrowing rate in the repo market, secured by U.S. Treasury bonds.

The rise in both rates indicates an increase in borrowing costs—there is a lack of money in the market!

This is also the root cause of the sharp decline on 10.11—the liquidity crisis combined with high leverage caused the extreme spike on that day.

On Wednesday night, Powell made a rare dovish statement, even considering halting balance sheet reduction.

I think it’s not just the decline in employment rates; a deeper concern is the liquidity crisis in the U.S. financial market—the worst-case scenario is a global financial market crash, similar to the moment of the outbreak of the 3.12 pandemic.

After all, there is a considerable lag from interest rate cuts to an increase in employment rates, but the liquidity crisis in the financial system could lead to a shock overnight.

However, I feel there is no need to be overly worried, as both the market and the Federal Reserve are prepared and have foresight, so they should not let the liquidity in the financial market face significant problems.

Therefore, even if there is a continued decline, it is highly unlikely to fall below the lowest point on the night of 10.11. Even if it does drop below, it may take the form of a spike.

Thus, in terms of operational strategy, I will still build positions in batches above the low point of 10.11, and if it truly drops below, I will mobilize funds from outside to continue adding to my position!