The Federal Reserve's tug-of-war has turned the Bitcoin market into a mess

Recently, the Fed's actions have been outrageous—on December 22nd, they injected $6.8 billion in a single day, and over the past 10 days, a total of $38 billion has been pumped into the market. Yet, both the crypto and stock markets remain unmoved. A senior trader on Wall Street privately complained that this is more absurd than holding long and short positions simultaneously: on one hand, ending quantitative tightening and releasing liquidity, on the other hand, using reverse repurchase agreements to drain funds. On December 18th, the overnight reverse repo scale even soared to $10.361 billion. The money went in, but the market didn't react—it's truly money spent in vain.

The core issue lies in the US debt black hole. Over the past three months, $700 billion in new Treasury bonds have been issued, literally draining liquidity from the market. Interbank borrowing rates have surged, and small business financing has become significantly more difficult. Ironically, all the liquidity released by the Fed has flowed into financial assets— the S&P 500 hit new highs, and gold has gained over 60% this year—while ordinary retail investors' wages have shrunk for three consecutive months.

Looking at $BTC's situation, Bitcoin is stuck around $86,000 and oscillates repeatedly, with technicals at an impasse. The Fear & Greed Index has fallen to 25, indicating extreme fear. On-chain data shows an even worse picture: long-term holders are continuously selling, and $300 billion worth of dormant Bitcoin has re-entered the market this year. Spot ETFs are also experiencing net capital outflows.

There's also an invisible bomb— the Bank of Japan's interest rate hike to a 30-year high of 0.75%. Historical experience suggests that this point usually triggers an average 15% correction in Bitcoin.

However, there is some hope. The market has $270 billion in stablecoins (USDT accounts for $16 billion) poised for deployment—potential additional ammunition. The Fed's reverse repo scale has fallen to a historic low of $3.047 billion, indicating signs of easing liquidity tightness. From the current situation, the probability of a big Christmas rally continuing the usual year-end surge is low, as internal contradictions in the Fed's policies have rendered traditional rules ineffective.

If you're looking for a bottom-fishing opportunity, keep a close eye on two data points: the bank reserve ratio and reverse repo balances. Any sudden change in these indicators could signal a market turning point.