The Federal Reserve's recent actions are truly outrageous. On December 22nd alone, they injected $6.8 billion in liquidity, and over the past 10 days, the total liquidity infusion reached $38 billion, yet the crypto and stock markets responded with little to no movement. A veteran Wall Street trader privately complained that this operation is even more absurd than opening multiple long and short positions simultaneously — on one hand, ending the quantitative tightening cycle and releasing liquidity; on the other, aggressively draining funds through reverse repurchase agreements, with overnight reverse repo volumes even spiking to $10.361 billion on December 18th. Money flows in, but the market remains dead silent, truly a case of spending money to gain nothing.

Where is the root cause? The US debt black hole. Over the past three months, $700 billion in new Treasury bonds have been issued, effectively siphoning liquidity directly from the market. Interbank borrowing rates have surged, and small business financing has become significantly more difficult. The most ironic part is that all the liquidity released by the Fed has flowed into financial assets — the S&P 500 hitting new highs, gold prices rising over 60% this year — while the income of ordinary workers has shrunk for three consecutive months. This is a classic case of liquidity being wasted.

Now, let’s look at Bitcoin’s situation. The current price is stuck around $86,000, oscillating repeatedly, with technicals at an impasse and no clear direction. The Fear & Greed Index has dropped to 25, indicating extreme fear, which shows market sentiment is quite fragile. On-chain data is even more sobering: long-term holders are continuously selling, and the $300 billion worth of dormant Bitcoin has re-entered the market this year. Spot ETFs have shifted to net outflows. These signals combined suggest that market absorption capacity is weakening.

There’s also an invisible bomb to watch out for — the Bank of Japan just raised interest rates to 0.75%, the highest in 30 years. Historical experience suggests that such a policy shift typically triggers about a 15% correction in Bitcoin, and this time is unlikely to be an exception.

However, there’s still some hope. The market has about $270 billion in stablecoins ready to deploy (including $16 billion in USDT), which can be seen as potential additional ammunition. The Fed’s reverse repo volume has fallen to a historic low of $3.047 billion, indicating signs of easing liquidity tension. Based on current conditions, the chances of a big rally during Christmas are slim, as the internal contradictions within the Fed’s policies have already disrupted traditional market rules.

If you’re looking for a bottom-fishing opportunity, keep a close eye on two indicators: the reserve requirement ratio and reverse repo balances. Any reversal in these two data points often signals a market turning point.