In both days, the market focus was on whether the Fed will cut interest rates and how many basis points. But to be honest, everyone may be looking in the wrong direction.

A truly noteworthy twist takes place in a more hidden corner.

The Fed has stopped shrinking its balance sheet. This action, the balance sheet contraction plan that lasted for three years, quietly pressed the pause button.

What does shrinking a balance sheet mean? In layman's terms, the central bank recycles dollars from the market. Now it's not accepted, why?

Because the reserves of the banking system are approaching the warning line. The overnight lending market has seen frequent interest rate jumps recently, and you must have seen this situation in decentralized lending protocols - the pool is almost dry, and borrowing costs are skyrocketing. The traditional financial system is now facing similar liquidity constraints.

So a 25 basis point rate cut or 50 basis points? That's just appetizers.

The key is how the Fed replenishes system liquidity next. There are already rumors in Wall Street circles that a new, structured asset purchase plan may be in the pipeline. It is said to start as early as January next year, with monthly purchases of $35 billion to $45 billion in Treasury bonds. In total, more than $400 billion in new liquidity injections a year.

What scale is this equivalent to? Imagine a large "stablecoin issuance protocol" restarting minting, only this time in a fiat version of the currency system.

The crypto market has always had a keen sense of smell. Bitcoin recently returned to around $94,000, and several crypto-related concept assets are strengthening. The market gives judgments with actual capital flows.

There are also different voices within the Fed now. Hawks are worried about a resurgence of inflation, and doves are even more afraid of a hard landing for the economy. This year is another election year, and you know where the policy balance will eventually tip.