Liquidity is like the oxygen in the crypto world. Right now, this oxygen is being drawn away, but new oxygen tanks are still on the way.

Recently, the market has indeed made many newcomers uneasy. Watching Bitcoin fall along with US stocks, it's natural to feel anxious. But there's no need to be overly pessimistic; this isn't entirely the market's fault.

The root cause points to the US government—they have been shut down for 37 days, setting a record for the longest shutdown in history. This isn't just political drama; for global capital markets, it's a real liquidity crisis.

**How the Shutdown Drains the Market**

Negotiations between the two parties broke down, the budget stalled, and the government stopped spending. But tax revenue still comes in as usual, and the Treasury continues to issue bonds to raise funds. Money flows in but not out, causing the US Treasury General Account (TGA) balance to balloon—surging to $1 trillion. This effectively siphons over $700 billion in liquidity directly from the market.

Let's consider the scale: it's comparable to multiple rounds of rate hikes by the Federal Reserve. Bank reserves have fallen to their lowest since 2021, and borrowing costs have skyrocketed. The overnight repurchase rate hit 4.27%, and the secured overnight financing rate jumped by 18 basis points.

For assets like Bitcoin, which are highly dependent on liquidity, this is like a heavy blow. With less money in the market, risk appetite naturally declines.

**The Superimposed Effect of Cycles**

Of course, macro factors are only part of the picture. The crypto space itself has reached a critical juncture, with the cycle rotation curse still at work. The collision of multiple factors has led to the current situation.