The wave of Bitcoin's plunge in the early morning left many people puzzled about the trend. In fact, it all boils down to two key issues: liquidity being drained and the dashed hopes of interest rate cuts.

The US Treasury auction cannot be underestimated. The TGA account has now hit a bottom, and the financial markets are already starved for liquidity. Over the past three and six months, the issuance scale of US Treasuries has exceeded expectations, pulling a total of 163 billion dollars from the market at once. During a tightening cycle, liquidity is like the blood of the market; losing too much blood makes it naturally difficult for risk assets—Bitcoin, as a high-risk asset, is hit first.

The Federal Reserve is also not resting. Hawkish officials' tough statements have directly shattered the expectation of a rate cut in December, causing market expectations for rate cuts to drop from seventy percent to almost none. It’s important to note that expectations of rate cuts act as an adrenaline shot for risk assets. When these expectations collapse, market sentiment instantly freezes.

The urgency of liquidity combined with cold market sentiment is the fuse for a sell-off.

But don’t be too pessimistic. Once the government resumes operations, replenishing the TGA will release new funds; if the Fed slows down reverse repurchase operations, liquidity will also thaw. Market cycles always repeat, and the true profit logic is to understand the rhythm of liquidity and make the right choices during bull and bear transitions.