Fu Peng: The Deep Binding of Crypto Assets and Liquidity, Intensifying Market Divergence

Fu Peng delivered a speech at WIKIEXPO, analyzing the relationship between the crypto market and global liquidity. He pointed out that mainstream crypto assets like Bitcoin are seen as leading indicators of liquidity strength and are deeply bound to global core liquidity. After the 2008 financial crisis, global liquidity peaked in 2021, with November of last year marking a critical turning point. The Federal Reserve's balance sheet reduction led to structural funding pressures in the market, resulting in an overall contraction of global funds. During the tightening liquidity cycle, funds prioritize clearing high-elasticity and high-speculation assets, with cryptocurrencies and small-cap stocks being the first to be reduced, forming a "shrinking circle" market. Fu Peng emphasized that many crypto traders mistakenly believe that funds will flow into U.S. stocks during periods of no market activity. In reality, during liquidity tightening phases, institutions will prioritize clearing high-speculation assets, putting cryptocurrencies and small-cap stocks under the most pressure. He observed that the market capitalization of Bitcoin and Ethereum is gradually stabilizing, with volatility continuing to decline, and market participants becoming more institutionalized, indicating the characteristics of core assets after the bubble has cleared. He noted that the logic of speculating on air crypto assets has become ineffective, and liquidity is the core influencing factor for all financial assets.

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