The Fed's "Double Bang" Ignites the Market: 40 Billion Liquidity Frenzy or Hawkish Trap? As the market holds its breath awaiting the Fed's Christmas gift, Powell plays a game of "left and right"—wearing the "dovish" cloak of a 25 basis point rate cut, while the dot plot conceals a deadly "hawkish" claw. More surprisingly, a sudden plan to expand the balance sheet by $40 billion has unexpectedly added uncertainty to this year-end drama. 1. Hawkish Rate Cut: An "Unwilling" Compromise On the surface, a 25bp rate cut is fully in line with market expectations, but peeling back the layers reveals more bitterness than anticipated: 1. The Biggest Disagreement in Five Years Among the 12 voting members, 3 voted against the cut, marking the most severe internal split since 2019. More critically, nearly half of the officials believe "this rate cut was unnecessary," directly challenging the market's easing expectations. 2. Dot Plot's "Killer Move" The forecast of only one rate cut by 2026 sharply contrasts with Wall Street's expectation of two. This suggests that the current interest rate level of 3.5%-3.75% might be the "floor" of this rate-cut cycle, not the starting point. 3. Powell's "Disclaimer" Repeatedly emphasizing "preemptive rate cuts" at the press conference, the core goal is to prevent a surge in unemployment among college graduates aged 20-24. But the problem is, core inflation stubbornly remains at 2.8%, with tariffs still clouding the horizon, and inflation returning to the 2% target remains a long, arduous journey akin to a pilgrimage to the West. Core Contradiction: The Fed is walking a tightrope between "keeping employment" and "controlling inflation," but hawkish tendencies are now fully exposed—this rate cut seems more like a forced "pacifier" for the market. 2. $40 Billion Balance Sheet Expansion: Christmas Gift or Liquidity "Fire Hydrant"? Compared to the conventional rate cut, the $40 billion monthly bond purchase program is the real "king card." But Powell's firm stance suggests a "technical" operation—he insists it is unrelated to monetary policy. What's the truth? • Reserve Shortage in Banks: After over two years of quantitative tightening, the Fed's balance sheet has shrunk by over $2 trillion, pushing bank reserves close to warning levels, with repo market volatility frequent. • Year-End Liquidity Black Hole: Seasonal factors combined with regulatory requirements can naturally lead to "cash shortages" at year-end. • Precise Timing: Launching balance sheet expansion simultaneously with rate cuts, even if "technical," could be interpreted by markets as a policy shift signal. Historical Reflection: During the repo market crisis of September 2019, the Fed also restarted balance sheet expansion under the guise of "technical operations," which triggered a new wave of asset price rises. Will the same script replay this time? 3. Cryptocurrency Market: Cold Reflection Amid Liquidity Frenzy For crypto markets, loose liquidity has always been a catalyst for rises. But this time, we need to stay alert: Short-term Excitement • Monthly injection of $400 million into financial systems, creating a liquidity honeymoon for risk assets. • Rate cuts reduce the appeal of holding cash, prompting funds to seek high-risk, high-reward assets. • BTC quickly recovers after the news announcement, with the market voting with real money. Mid-term Concerns • Hawkish dot plot indicates that liquidity easing has a "shelf life," and markets may overreact. • If inflation rebounds, the Fed may be forced to "cut rates and expand the balance sheet" simultaneously, locking in policy space. • Institutional rebalancing continues, with giants like BlackRock and Fidelity trimming high-risk exposures during quarter-end rebalancing. ZEC Warning: As a privacy coin, ZEC dropped 2.52% to $403.26 after the news, indicating that not all tokens enjoy liquidity benefits. Fundamentals, regulatory risks, and market positioning will determine survival during liquidity downturns. 4. Investor Strategies: Staying Clear-headed Amid Festivities The current market is in a typical "policy-driven period," with sentiment diverging from fundamentals. A "three-three" strategy is recommended: 4. 30% Core holdings: Mainstream assets like BTC, ETH, enjoying liquidity benefits, but with stop-loss and take-profit setups. 5. 30% Cash reserves: Hold USDT/USDC for potential pullbacks after market overexcitement. 6. 40% Selected projects: Focus on projects with actual use cases and healthy cash flow, avoiding purely narrative-driven tokens. Key Risk Points: • Monitor next week's core PCE data; if inflation exceeds expectations, hawkish forecasts will spike. • Keep an eye on the Fed's reverse repurchase agreement (RRP) usage; significant increases indicate liquidity is not flowing into risk assets. • Watch yen arbitrage activities; if the Bank of Japan continues rate hikes, USD liquidity may be diverted. 5. Final Question: How Long Can the Christmas Rally Last? The answer depends on the game between three variables: 7. Total Liquidity: Can $40 billion/month persist? Powell has hinted at adjustments based on market conditions. 8. Inflation Trends: Is 2.8% core CPI the peak or the starting point? This will shape the Fed's policy space. 9. Institutional Behavior: Are giants like BlackRock and Fidelity using the rebound to offload or to increase positions? Rational Outlook: Short-term (1-2 weeks) market sentiment is euphoric, with a high probability of continued rebound; medium-term (1-3 months), beware of inflation data backlash and renewed hawkish expectations; long-term, the value of cryptocurrencies will ultimately return to adoption rates and network effects rather than mere liquidity infusion. In this liquidity feast, are you raising your glass to join, or observing coldly from the sidelines? • A. Go all-in: Believe "water raises all ships," the liquidity bull market has started. • B. Cautious participation: Small positions to test waters, keeping most cash for clearer signals. • C. Mainly on the sidelines: Think hawkish signals are underestimated, markets overly optimistic. Click to follow @CryptoGoldDigger for firsthand in-depth analysis of Fed policies and crypto markets. If you find this article helps you see through the market's essence, share it with fellow friends who are lost; if you hold a different view, leave your logic in the comments—most solid analysis will be pinned. Don't forget to like and support—every interaction fuels our continued delivery of penetrating market insights. In the chess game of central bank chiefs, retail investors' only moat is cognition. Don't let the frenzy turn into your tomb. #美联储降息预测 $BTC

1H not steady above 3020, All longs are like flirtations in a nightclub. ⸻ Here's the last sentence for you: Current ETH is like someone just finished showering, wrapped in a towel and standing there— You can stare, but don't rush with your hands, Wait until she comes over, or she turns to leave.

SOL: Pullback around 123-119, with a bullish outlook towards 130-137! If broken through, continue to look higher at #加密市场反弹 #美联储降息预测