On Wednesday morning, price alert sounds from the trading app kept popping up one after another. Bitcoin broke through key levels within thirty minutes, plunging 6%. Several newcomers in the group were already asking, "Is it going to zero?" I sipped my coffee and glanced at the backend data, but I wasn't panicking—the path of this drop was very clear. It wasn't any sudden negative news; it was just the U.S. Treasury and the Federal Reserve "draining liquidity" in a coordinated, visible move.

After so many years in the industry, I've seen plenty of wild surges and crashes in the middle of the night, even survived consecutive liquidations during bear markets. Today, let me break down exactly what happened behind this round of sharp declines. Once you understand the logic, you won't freak out or play the fool next time something similar happens.

# # The Essence of the Crash: Three Forces Drained Market Liquidity at Once

A lot of people instinctively think every crypto market drop is "whales dumping on retail investors." But that's not the case this time—the funds were sucked out by even more powerful "players." It all boils down to three things:

**The Treasury Issued Massive Debt to Absorb Capital**
Recently, the news about a possible U.S. government shutdown was everywhere, but in reality, the Treasury’s account was running dry. Last week, the Treasury urgently issued $163 billion in short-term bonds, basically telling the market, "Hand over your money." Institutional investors had no choice but to pull funds from risk assets like stocks and crypto to buy up these bonds. Imagine a reservoir having a huge amount of water drained—the water level is bound to drop. This kind of passive outflow has nothing to do with asset quality; it's purely a forced shift in liquidity.

**The Fed Poured Cold Water on Rate Cut Expectations**
Last week, a Fed official said, "The direction of future policy is still unclear," which immediately shattered the market's hopes for a rate cut. I was watching the data at the time, and the probability of a December rate cut plummeted straight from 70%...