Opening the trading panel these past two weeks, many people probably felt a jolt—crypto markets plunged in tandem with the US stock market, and newcomers are even starting to question their life choices. But if you’ve been watching the markets long enough, you’ll realize that this correction isn’t the end of the bull run; instead, it’s a case of “liquidity asphyxiation” temporarily choking the market.

Let’s break down the numbers: The US government shutdown has already broken the 37-day historical record, with both parties deadlocked over the budget. What happens when there’s no money? The Treasury can only draw liquidity from the market—over the past two months, nearly $700 billion in liquidity has been sucked back in. It’s like a once-full reservoir suddenly having its floodgates flung open, draining the banks’ available funds almost instantly, with the Fed’s bank reserves dropping to their lowest level since 2021.

Once liquidity dries up, the market immediately shifts into “slowdown mode”: borrowing costs soar, and the secured overnight financing rate jumped by 22 basis points, wiping out all the gains from previous rate cuts. In this environment, any minor disturbance triggers risk-off sentiment, which explains why US stocks and crypto have been “dropping in sync”—it’s not that the assets themselves are problematic, but rather that there’s not enough money to go around.

Here’s some practical analysis. The core issue behind this correction is “short-term liquidity tightening,” not a fundamental collapse. To catch the reversal, focus on three key signals:

First, the official announcement of a finalized bipartisan budget agreement;
Second, signs that the Treasury’s TGA account has stopped contracting;
Third, a weekly uptick in the Fed’s bank reserves data.

Once all three conditions are met, the market’s “oxygen supply” will be restored, and ETH along with other major coins could perform beyond many people’s expectations. Now is not the time to panic and exit, but to understand the rules of the game—when the budget drama in Washington ends, that’s when liquidity will start flooding back into the market.