Bitcoin suddenly plummeted in the early morning, do you understand it?

Many people woke up in the morning and were directly stunned when they saw the market—how did it plummet out of nowhere?

To be honest, the logic behind this wave of decline is not complicated. The core issue is just one: the money in the market has been withdrawn.

Most people lose money because they do not see this essence clearly.

**Where has the market's money gone? The US debt auction has dried up the liquidity**

The U.S. government is now in a shutdown, and the Treasury General Account (TGA) is basically running low. The market is already short on cash, and liquidity is tight enough.

The Federal Reserve wants to inject some liquidity from the banks, but the speed of the bond market, this "money-sucking black hole," is frightening.

Here are the data for the 3-month and 6-month Treasury bond auctions:
- Nominal scale 163 billion
- Actual scale 170.69 billion
- After deducting the Federal Reserve's own reinvestment portion, the market was drained of 163 billion in a short time!

When liquidity is abundant, this little bloodletting doesn’t matter. But now it’s a tightening cycle, and funds are already tight, so with this withdrawal, risk assets naturally can't withstand it.

The recent drop in Bitcoin is the most direct response to the outflow of funds. It's like a person suddenly losing too much blood and being unable to stand; when the market runs out of money, it naturally falls.

**The hope for interest rate cuts has been shattered, pouring cold water on expectations**

The Chicago Fed's Goolsbee recently continued to speak hawkishly, and market expectations for a rate cut in December have basically cooled. The probability of a rate cut has clearly dropped from nearly 70%.

It is important to know that the expectation of interest rate cuts serves as a strong stimulant for risk assets. Now that the stimulant is gone, market sentiment has been doused with a bucket of cold water.

**Two heavy punches hit down at the same time**

Think about it:
- One side is liquidity being tightened
- On the other hand, the expectation of interest rate cuts has not materialized.

With these two mountains pressing down together, can risk assets remain standing? Bitcoin, as a highly volatile asset, naturally bears the brunt of it.

Once emotions turn pessimistic, selling follows, further exacerbating the decline. This is a typical chain reaction.

**Don't panic, the repair path is actually very clear**

How will the future market move? In fact, the path is quite clear:

First, after the government resumes operations, TGA will inject liquidity again, and the liquidity will naturally improve. When the pool is refilled, the market pressure will ease.

Secondly, if the Federal Reserve reduces reverse repurchase operations, short-term funds will be released, and the market's sense of tension will significantly decrease.

It is like the changing of seasons, it will always change. After the storm, those who can stand firm are the winners.

The market is always in a cycle; the key is to clearly see which stage we are currently in and then be prepared.