The Federal Reserve's policy logic has completely gone awry. On one hand, they claim to end quantitative easing, but on the other hand, they are aggressively injecting liquidity—releasing $6.8 billion in a single day on December 22, with nearly $38 billion released over the past ten days. Strangely, despite so much money entering the market, the crypto and stock markets are behaving as if cursed, showing no vitality.

Wall Street traders privately complain that this operation is simply magical. The Fed is simultaneously flooding and draining liquidity, claiming to be doing reverse repos to de-leverage. On December 18, the overnight reverse repo scale soared directly to $10.361 billion. It’s like transferring money from one hand to the other—purely a joke—spending a lot of money but seeing no market response.

The root of the problem lies in U.S. debt. In the past three months, new debt has increased by $700 billion, which directly withdraws liquidity from the market. Interbank borrowing rates have started to spike, making it difficult for small and medium enterprises to get financing.

Ironically, all the liquidity released by the Fed has flowed into Wall Street. The S&P 500 keeps hitting new highs, gold has risen over 60% this year, while the wages of ordinary people have been shrinking for three consecutive months. This is a typical "trickle-down economy"—no matter how much water is above, it can’t reach below.

Bitcoin’s days are even tougher. It is currently oscillating around $86,000, with no clear direction. The market fear index has fallen to 25, which is in the extreme fear zone. On-chain data is even more heartbreaking—long-term holders are continuously selling off, with $300 billion worth of dormant Bitcoin becoming active again this year, and institutional ETFs have shifted from net inflow to net outflow.

Adding insult to injury, the Bank of Japan just raised interest rates to 0.75%, the highest in 30 years. Historical patterns show that in such situations, Bitcoin usually retraces about 15% on average.

However, there is still some hope. The market still has $270 billion in stablecoins (including $16 billion in USDT), which is a potential ammunition reserve. Plus, the Fed’s reverse repo scale has dropped to $3.047 billion, a relatively low level, indicating that the market is gradually releasing pressure.

But it must be admitted that this year’s Christmas rally is likely to say goodbye to the pattern of big gains seen in previous years. The internal policy rift within the Fed has completely broken the old trading rules. The market needs to find its rhythm again.

If you want to position at the bottom, focus on two indicators: changes in the bank reserve ratio and reverse repo balances. These two data points often provide early signals. When these two stabilize, the rebound opportunity will truly arrive. For now, patience is key—don’t be fooled by short-term market noise.