At the end of the year, there was a big problem in the traditional financial circle.

The big institutions on Wall Street have been a bit panicked lately. The reason is simple – there is not enough money. It's not that any bank is bankrupt, but that the entire "reservoir" of the money market is about to bottom. How big is this pool? $12.6 trillion. More than the ten tech giants with the highest market capitalization in the world combined.

Now the question is: where did the money go?

Let's talk about the bank's emergency reserve first. Do you know that banks will set aside a "reserve" to deal with emergencies? Now the money is running out. Just like you are used to putting a few hundred yuan in cash in your wallet, and suddenly find that there are only 20 yuan left, you will definitely panic in case of emergency. The same is true for banks, where the buffer is gone and the vulnerability of the system is exposed.

Let's look at the cost of borrowing money. In the past, when institutions borrowed money between institutions, the overnight lending rate was negligible. What now? Interest rates are jumping up, and borrowing money is getting more and more expensive. Corporate financing and institutional turnover, cost pressure has increased sharply. In this environment, who dares to increase leverage easily?

The most troublesome thing is that no one knows what to do this time.

The Fed has been "shrinking" its balance sheet in recent years - to put it bluntly, it is to draw money from the market. I have never encountered such a severe liquidity crunch before, and I have zero experience. Without historical data reference, market expectations are naturally more chaotic, and panic is amplifying.

Under a few figures, the total size of the money market is 12.6 trillion US dollars, the balance of bank reserves continues to decline, and short-term financing interest rates continue to rise. These three indicators are red lights at the same time, no wonder institutions can't sit still.

For the crypto market, the liquidity crisis in traditional finance is not an isolated event. The capital side has tightened, risk appetite has declined, and the chain reaction will be transmitted sooner or later. At this juncture at the end of the year, it is always right to keep an eye on it.