Be patient and wait for the U.S. government to 'open up', and liquidity will return.
Brothers, the current quietness in the market is actually quite simple — the U.S. government has shut down, and funds have been 'drained'.
The latest news is that the U.S. government has been shut down for a full 37 days, whether it’s 37 days or 38 days, I can’t remember clearly, it doesn’t matter, the historical record has been broken.
This shutdown is actually just Congress arguing — one wants to spend money, and the other wants to save money, and the budget bill has been delayed. As a result, the government can't distribute money, so it can only 'close its doors'.
But the government has stopped, the country can't just stop operating. The Treasury can only keep borrowing money from the market to maintain basic expenditures. In just these two months, it has drained nearly $700 billion in cash from the market.
Now, the water in the banking system has been drained. The Federal Reserve's bank reserves have dropped to $2.85 trillion, hitting the lowest point since 2021.
Without money in the banks, the supply of funds in the market has naturally tightened, pushing interest rates higher.
For example, the short-term financing rate (SOFR) soared to 4.22%, marking the largest increase in a year, and financing costs have suddenly become more expensive.
You may ask: didn’t the Federal Reserve cut interest rates recently?
Yes, nominally it is a 'rate cut', but the Treasury's 'money-draining operation' has directly offset the effect.
It's as if the Federal Reserve is providing liquidity while the Treasury is draining it away, and back and forth, the market returns to square one — the rate cut has become a lonely affair.
At this moment, market liquidity is tight, and funds dare not run around, so the capital market will naturally become fragile.
So you see that during this period, both U.S. stocks and cryptocurrencies have corrected; it’s not that anyone is 'smashing the market', but the whole market really has no money.
Next, we can only wait for the U.S. government to reopen, for funds to flow back in, and the market water level will gradually rise.
At that time, the market conditions will naturally recover.
Now, the most we can do is — don’t move around, stabilize our positions, and quietly wait for liquidity to return.
