The two main real driving factors behind the sharp decline in BTC

Current Bitcoin quote: $72.89K, down 3.77% in 24 hours, and the stock market has also experienced a similar “dark moment.” But this decline was not entirely unexpected. Breaking it down, there are fundamentally two reasons at play—one from the capital side and one from the policy side. Understanding these two points can help clarify the market’s logic and make it less likely to be scared by short-term fluctuations.

Capital Pressure: Liquidity Is Accelerating Outflow

The U.S. Treasury Department has recently faced a liquidity crunch and has adopted strict balance strategies. The most direct manifestation is the continuous large-scale Treasury auctions—recently, the issuance of $163 billion in Treasury bonds is a typical example. These bonds require funds to purchase, and where does this money come from? A large part is “sucked out” from risk assets like the stock market and the crypto space.

Essentially, this is a “zero-sum game”—limited market liquidity is absorbed by the Treasury’s bond issuance, flowing into the bond market, which relatively reduces the funds available for risk assets. As a high-risk asset, Bitcoin naturally faces greater selling pressure in an environment of tightening liquidity. It’s like a water reservoir: less inflow and continuous outflow will inevitably lower the water level.

Policy Suppression: Rate Cut Expectations Completely Faded

The change in the Federal Reserve’s stance constitutes another blow. Recently, Fed official Goolsbee explicitly stated that a rate cut is not being considered in the short term. Previously, the market was still hopeful for a policy shift by the end of the year, but this expectation has now been completely shattered.

This reversal of expectations has a direct and intense impact—the “policy rescue” signals that investors were hoping for did not appear; instead, they heard “stay the course.” Panic quickly spreads, and selling surges. Changes in policy expectations often trigger market volatility more easily than actual policy implementation because they break market psychological expectations.

Current Judgment: The Decline May Signal a Rebound Critical Point

This wave of decline looks dangerous, but it is not the beginning of a bear market; rather, it is a typical “funds-driven” emotional dip. The key is that these two suppressing factors are temporary—not trend-based.

Once the U.S. government resumes regular funding or the Fed signals any easing, market liquidity will quickly return. Historical experience shows that such “cash crunch” declines tend to recover rapidly. The sharper the fall, the stronger the rebound momentum, bringing the market closer to a reversal point.

Three Practical Tips: Rationally Navigate Volatility

Step 1: Don’t Let Panic Drive You

The most common mistake during a sharp decline is blindly following the trend—seeing prices drop and rushing to close positions to cut losses; or panicking and bottom-fishing indiscriminately. Staying rational and controlling emotions is the first line of defense.

Step 2: Focus on Undervalued Quality Assets

Bitcoin and fundamentally strong tech stocks that are oversold often face indiscriminate selling during market panic. But their fundamentals remain unchanged. Once liquidity recovers, these assets tend to rebound the most. Now is the best time to calmly observe and look for undervalued opportunities.

Step 3: Keep Cash Reserves

“The opportunity is born from declines”—this saying always applies. Holding cash reserves allows you to wait for clear policy signals and market bottoms before acting, which often yields the highest returns. Conversely, using up your capital prematurely means you’ll only be a spectator when real opportunities arrive.

In market cycles, surviving longer and not being eliminated by emotions is more important than chasing every upward wave.