This week, the financial markets are truly two different worlds. On one side, the eagerly anticipated Fed rate cut has finally arrived; on the other side, Bitcoin has plummeted below 85k, Ethereum has lost the 3000 mark, and mining stocks have dropped more than 10%. It seems quite ironic, right? A rate cut should be favourable information for risk assets, yet crypto assets have instead crashed.

Where is the problem? On the surface, it's a liquidity signal, but the underlying logic has issues. The Fed has indeed lowered interest rates, but no one understands how to proceed next. Previously, the market generally bet that there would be a series of continuous interest rate cuts in 2026, but the Fed's statement was filled with ambiguous phrases like "adjust dynamically based on data." The crypto assets, which were originally supported by liquidity expectations, instantly lost their appeal, and large holders began to exit early.

The worst is yet to come. The "easing" by the Fed has been directly offset by the "tightening" of the Bank of Japan. After 30 years of patience, the Bank of Japan is finally set to start a rate hike cycle, which is a real blow to the crypto market. For a long time, a large number of global crypto investors have relied on low-interest Japanese yen for arbitrage — borrowing cheap yen to buy risky assets like Bitcoin. With the yen interest rates rising, the arbitrage opportunities are gone, forcing investors to close their positions. As a massive sell-off begins, Bitcoin won't be able to withstand it and will be plummeted in the short term.

The reasons behind this wave of decline cannot be explained by a single factor. The Fed, the Bank of Japan, and global capital flows are all intertwined. For investors, the key now is to understand how the liquidity landscape will evolve, rather than being frightened by short-term fluctuations.