Last night, when I opened the trading panel, mainstream cryptocurrencies collectively plunged, and Bitcoin directly broke through the $65,000 support level. Panic spread instantly in the community—some suspected large funds fleeing, some worried about potential bearish news yet to be released, and even more people were torn about whether to cut their losses and exit.

But if you’ve really been in this market for a few years, you’ll understand: there aren’t that many conspiracy theories behind this drop. Simply put, two forces simultaneously drained market liquidity. Short-term panic is normal, but once you understand the underlying logic, you’ll know how to respond.

**First Liquidity Drain: Emergency Financing by the U.S. Treasury**

Recently, the U.S. Treasury’s TGA account (think of it as the federal government’s “checking account”) was running low. To avoid a cash crunch, the Treasury urgently sold $163 billion in government bonds. What does this number mean?

Institutional investors, funds, and even some retail investors had to put up real cash to absorb these bonds. Overnight, more than $170 billion in liquidity was locked up in fixed-income products, no longer available for risk assets.

And cryptocurrencies are the quintessential high-risk assets. When a big chunk of the market’s capital pool is suddenly siphoned off, price drops are almost inevitable. It’s like a pool where the inflow is shut off while the outflow continues—the water level can only go down.

**Second Liquidity Drain: Hawkish Fed Statements**

Just as the market was still reeling, Fed official Austan Goolsbee delivered another blow. In a late-night speech, he made it clear that inflation is still far from the Fed’s target, and the likelihood of a rate cut in December is extremely low.

This statement directly dashed the market’s hopes of monetary easing. Remember, the crypto market is largely driven by liquidity; cooling rate cut expectations = higher cost of capital = pressure on risk assets. Such macro-level headwinds often hit sentiment harder than technical factors.

So you see, there’s nothing mysterious behind this drop; it’s simply the combination of two factors: large-scale Treasury bond issuance locking up liquidity + the Fed dampening rate cut expectations. The market is just reacting to this tightening of liquidity in the most direct way.

Short-term volatility is inevitable, but if the fundamentals haven’t changed, this kind of liquidity squeeze-induced drop could actually be a good opportunity to reposition. The key is not to get swept away by emotions—focus on identifying the real driving forces.