Understanding the Basic Framework of US Dollar Liquidity with One Chart The liquidity of the US dollar is like the "water source" of global funds, with the Federal Reserve controlling the faucet 🟩 When interest rates are cut and quantitative easing (QE) is implemented, the floodgates are opened to release "water". With more money in the market and easier borrowing, it drives the economy and assets to rise (US stock market/cryptocurrency circle). 🟥 When interest rates are raised and quantitative tightening (QT) occurs, the market may face a shortage of funds and difficulties in financing, which may lead to a decline in assets (US stock/cryptocurrency market). As the world currency, the liquidity of the US dollar directly affects the global market, with funds flowing towards the world when it is released and the US dollar flowing back when it is released, causing market fluctuations in other countries. The essence of liquidity elasticity is an important means for the Federal Reserve to regulate economic employment and inflation. This article is sponsored by Gateio | @ Gateio_zh