Editor's Note: Just as the market regained upward momentum driven by liquidity, new uncertainties have begun to accumulate on the other end. The situation in Iran has reversed again, and the risks in the Strait of Hormuz are emerging, bringing geopolitical conflicts back to the core variable of asset pricing. Within just a few days, the market has shifted from the single logic of "fund-driven" to a dual game of "liquidity vs. risk events."

The current market is in a tug-of-war between "liquidity-driven gains" and "risk shocks from the escalation of the Iran situation." On one hand, the Federal Reserve and the U.S. Treasury injected nearly $200 billion in liquidity into the financial system in a short period, driving a rapid rebound in stocks and risk assets; on the other hand, geopolitical uncertainty, private credit risks, and overheated sentiment continue to make the market fragile.

In this structure, Bitcoin's role is beginning to change. Unlike traditional risk assets, it is more sensitive to changes in liquidity and often gives signals first when the funding environment shifts. Historical experience shows that whether it was the early decline in October 2025 or the率先 stabilization in this round of rebound, Bitcoin has, to some extent, played the role of a "leading indicator."

Therefore, the question is no longer just "will the market rise," but—as liquidity continues to be released and war risks resurface, which force will dominate pricing? If funds cannot continuously hedge external shocks, the current gains may only be a temporary mismatch; if liquidity persists, the market may continue to rise amid fluctuations.

What matters next is not a single variable, but their relative strength. And Bitcoin may once again be the asset that provides the earliest answer.

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"Oh, think twice, 'cause it's another day for you and me in paradise." —Phil Collins

For traders and investors, Friday was an unusual trading day. But Monday is still some time away, and the market is already brewing new variables—as early as Saturday morning, reports indicated that Iran's stance on the Strait of Hormuz issue had reversed, which could once again trigger market turbulence.

Additionally, Friday's rebound has pushed market sentiment indicators (see below) to a relatively fragile level, making the market more prone to corrections. This has plunged the market into a "tug-of-war": on one side is the massive liquidity injection discussed below, and on the other is the uncertainty brought by the potential reversal of the Iran war situation.

What Just Happened?

The impact of liquidity on the market is facing a test—against the potential further escalation of Iran war volatility.

Q: What happens when approximately $200 billion floods into the financial system almost simultaneously?

A: Asset prices experience a sharp "melt-up."

Lately, I've been focusing on four factors collectively suppressing the stock market: the Iran war, the liquidity crunch in the financial system that has persisted since January this year, widespread market pessimism, and insufficient understanding of the true state of the private credit market.

But last week, these factors were almost "all overturned": the liquidity crunch reversed, the Iran situation seemed to ease, and market pessimism once again proved to be—as it often is—a leading indicator of a potential stock market rebound.

Are we out of the woods? No one can be sure, as the Iran situation is heating up again. Moreover, if investors re-enter "panic mode," liquidity could dry up again. And we still lack a clear understanding of what is happening in the private credit market.

For now, however, let's focus on a relatively observable variable: liquidity.

Dual "Liquidity Tsunamis"

If you're wondering where the money driving the stock market rally over the past two weeks came from—think again: the answer is the Federal Reserve and the U.S. Treasury. Around April 15, the two injected approximately $200 billion into the financial system combined, providing traders with a "Tax Day buffer."

First, the first "barrel"—the Federal Reserve.

On April 15, the Fed injected nearly $110 billion into the market through repo operations (via Treasury bonds and mortgage-backed securities). This alone is not insignificant, but more crucially, the Fed is still injecting about $40 billion per month into the market through its Reserve Management Purchase (RMP) program.

The real focus is on the second "barrel"—the U.S. Treasury.

Drawing on Garret Baldwin's analysis, the U.S. Treasury injected approximately $140 billion to $200 billion into the market during the same period. That is, roughly speaking, without any formal quantitative easing (QE) announcement, the Fed and the Treasury quietly injected close to $240 billion in liquidity into the market.

It's not hard to understand why the stock market experienced an explosive rally.

The More Subtle Part: The Treasury's Operations

How did the Treasury accomplish this "covert operation"?

The key lies in an account—the "U.S. Treasury General Account" (TGA) held at the Fed. When the balance of this account rises, it usually signals tightening liquidity; when the balance falls, it means liquidity is being released.

According to Garret's calculations, around Tax Day, the balance of this "checking account" of the U.S. government at the Fed dropped from about $837 billion to about $697 billion. And on April 15, it rose back to about $924 billion.

The key is that about $140 billion of this had already flowed into the banking system before Tax Day, meaning the financial system was actually in a "liquidity-abundant" state before April 15.

Even more interestingly, the U.S. National Financial Conditions Index (NFCI, tracked weekly in this report) reversed its previous tightening trend in the latest data (April 10).

We pointed out this change in the daily report of "Smart Money Passport": "The Fed injected about $10.5 billion into the financial system that day, while the NFCI index fell for the first time since January 23, 2026. The combination of these two signals may indicate that the Fed has adjusted its liquidity-tightening stance."

The biggest suspense now is: will liquidity take the lead, or will a new round of escalation in the Iran war once again become the core variable for the market.

Bitcoin Starts to "Act": Why It's a Barometer of Liquidity

Bitcoin's performance next is crucial.

Because compared to stocks, Bitcoin is more sensitive to liquidity. Therefore, its performance after recently breaking through $75,000, and whether it can challenge the $80,000–$85,000 range, deserves close attention.

From a technical perspective, the resistance in the $80,000–$85,000 range is not strong. The volume-by-price (VBP) distribution in this range is relatively thin, indicating that no effective support was formed during the previous decline. Therefore, under normal circumstances, this level should not pose strong resistance during a price recovery.

If the rally fails here, it implies two things: first, the market lacks confidence in this rebound; second, there may be issues with liquidity itself. More importantly, if Bitcoin cannot break through this key range, it may also mean that the "liquidity tsunami" created by the Fed and the Treasury is rapidly receding.

If $200 billion in bank reserves are digested by the market in just a few weeks, it would be a dangerous signal. This could mean that risks are accumulating in the private credit market or elsewhere.

Don't forget, Bitcoin's decline in October 2025 accurately predicted the stock market's troubles in 2026. At the same time, Bitcoin stabilized weeks before the stock market bottomed and rallied ahead of time when the Fed and the Treasury released liquidity.

Against the backdrop of the evolving Iran situation and unresolved global risks, any weakness in Bitcoin should not be ignored.

The $70,000–$75,000 range is a key support level.

Sentiment Summary: Market Suddenly Turns Fully Optimistic

The CNN Fear & Greed Index (GFI) closed at 68 on April 17, 2026, in the "Greed" zone.

CoinMarketCap's Crypto Fear & Greed Index was at 59 on Saturday morning, in the relatively high "Neutral" level.

The Chicago Board Options Exchange (CBOE) Total Put/Call Ratio was 0.65, with the index options P/C ratio closing at 0.82. The options market sentiment overall remains neutral, but as bullish sentiment heats up rapidly, it is gradually tilting towards the bearish area.

The CBOE Volatility Index (VIX) closed at 17.48, a relatively positive level. However, it could still rise back above 20 (often seen as the risk警戒线) in the short term.

It's worth noting that the VIX typically rises when traders heavily buy put options. Increased demand for puts forces market makers to hedge by selling stock index futures, thereby putting downward pressure on the market.

Conversely, when the VIX falls, it means reduced demand for puts, market sentiment turns optimistic, and more call buying often follows. This prompts market makers to buy stock index futures to hedge risks, increasing the probability of stock market gains.

Liquidity Watch

1. Bullish: Liquidity is easing

The National Financial Conditions Index (NFCI) released by the Federal Reserve, in its latest reading for March 27, 2026 (published April 10), was -0.47, down from the previous week's -0.44, indicating that financial conditions are easing and liquidity is improving.

A decline in NFCI is usually seen as a bullish signal, and a negative index means market liquidity is relatively abundant.

2. Bond yields retreat

U.S. Treasury yields fell in the latter part of the week, but could rise again depending on developments in Iran.

The U.S. 10-Year Treasury Yield closed the week below 4.3%, also falling below its 20-day moving average. A further break below the 200-day moving average would be seen as a bullish signal; conversely, a rise back above 4.5% could push yields back towards the highs near 4.6% seen in May 2025.

3. NYAD, SPX, and NDX all hit new highs simultaneously

The NYSE Advance-Decline Line hit a new high, confirming the new highs in the S&P 500 Index and the NASDAQ-100 Index, forming a confirmation signal.

The current uptrend is validated—but only for now. A break below the 20-day or 50-day moving average could quickly change the market situation.

The NASDAQ-100 Index hit a new high last week, with 26,000 points now becoming a short-term support level.

The S&P 500 Index hit a new high last week and broke through the 7000 point mark. 7000 points has now become a short-term support level.