Looking at the recent crypto market trend, many people are getting confused. When the candlesticks go up, eyes light up, thinking a bull market is coming; when they go down, panic sets in, fearing a complete wipeout. Honestly, this chasing gains and selling losses rhythm is the easiest trap for beginners to fall into.

I've been in this circle for eight or nine years, seen many ups and downs, and I want to talk about what truly determines the big direction—don't listen to rumors; the actions of the Federal Reserve are the real "behind-the-scenes driver." If you understand this logic thoroughly, you can save yourself a lot of detours.

Let's start with the most basic question: what exactly is the Fed's rate hike? Simply put, it's the U.S. central bank raising the interest rate on borrowed money. Originally, banks lending to each other at an annualized 2%, after a rate hike, it becomes 4%. This also raises the borrowing costs for businesses and individuals. The purpose of this move is straightforward—one word: "control." When the economy is overheating and prices are rising too fast, increasing borrowing costs encourages everyone to save more and spend less, which naturally brings prices down.

Now, here's the question: how much does the Fed's action have to do with our crypto market? This is where we need to talk about the nature of capital. The money entering the crypto market, to put it simply, mostly belongs to "profit-seeking capital"—where the returns are high and the profits quick, that's where it goes. When the Fed raises interest rates, the most direct change is that "risk-free returns" go up.

What is risk-free return? For example, if you buy U.S. Treasury bonds, the risk is basically zero. Previously, you could earn 2% per year; after the rate hike, it becomes 4%. At this point, a lot of funds holding crypto assets will waver: why risk losing everything in this market when they can switch to bonds and earn a steady 4% interest? This straightforward logic causes capital to flow out.

Every Fed rate hike cycle involves such a "bloodletting" process in the crypto market. This is not coincidence; it's the operation of economic laws. Conversely, when the Fed starts cutting rates, the risk-free return drops, bonds become less attractive, and capital flows back into high-risk, high-return areas, including crypto. That’s why sometimes you see crypto prices suddenly surge.

Once you understand this logical framework, you won't be so clueless about the market. Don't always think about relying on insider information to buy the dip or sell the top—that's just illusions. What really matters is understanding the big macro environment—the Fed's statements, rate hike expectations, inflation data—these are the key factors that determine capital flow.

The most common mistake beginners make is treating short-term fluctuations as the big trend. In fact, short-term rises and falls are often just noise caused by capital moving in and out. As long as you can grasp the main line of Fed policy and understand why capital flows in or out, you'll avoid many detours. The crypto market is indeed full of opportunities, but the prerequisite is that you understand these underlying logics.