In October, the Federal Reserve announced a 25 basis point rate cut, which seemed to be a positive signal, and Bitcoin indeed surged initially. But then, a nearly 4% crash followed immediately, with the entire network experiencing a liquidation of $1.1 billion in one go, and 210,000 investors being completely wiped out. This trade feels particularly heartbreaking—how did a policy boost turn into a trap for cutting losses?

The seemingly counterintuitive situation is actually quite understandable. There’s an old market rule: buy in anticipation of policy changes, sell once the policy is implemented. From September to October, Bitcoin was artificially pushed up by 30% due to rate cut expectations. But what happened next? Once the actual policy announcement was made, institutional investors who had been lurking ahead of time immediately started to sell off. Retail investors, attracted by the "new all-time high coming soon" expectation, ended up being the last to buy in, becoming the final bagholders.

Another detail: the liquidity released by rate cuts doesn’t necessarily flow into the crypto market. In Q4, the US Treasury issued $1.2 trillion in bonds, which drained a large amount of idle cash from the market. Institutional investors are also very pragmatic—they prefer to allocate funds into traditional assets like bonds and stocks rather than going all-in on crypto.

Rate cuts also come in different types, which is often overlooked. Some are proactive adjustments due to a healthy economy, while others are precautionary measures against risks and economic slowdown. The current round of rate cuts belongs to the latter—preemptive easing. Under this context, investors’ risk appetite tends to decrease. Data speaks volumes: after the rate cut, gold prices broke through $2,200 per ounce, while Bitcoin actually declined. Investors voted with their feet—they chose traditional safe havens like gold over digital assets. Sometimes, market reactions are just this counterintuitive.