Recently, the Fed announced the end of balance sheet reduction on December 1st, and the trading circle exploded with voices saying "pump-priming is here." But in fact, many people have misunderstood.

Let's clarify this matter today - why stopping the tapering seems very favorable, but in reality, it doesn't directly trigger a bull market as everyone thinks.

**What does tapering actually mean?**

To put it simply, the Fed's balance sheet reduction is like drawing water from the market's pool of funds. Stopping the balance sheet reduction? It just means halting the action of drawing water, without actively adding new water.

Why has the Fed stopped? It's because the water level in the pool has really dropped to a dangerous position - the banks' reserves have fallen below a critical threshold, and the money market is starting to light up warning signals. In plain terms, this is a preventive measure to stop the bleeding; it's a passive response from the Fed, rather than them suddenly becoming generous.

**The market has already seen through**

This is the most crucial point: smart money started sensing this signal at the end of October. When Powell hinted at it, institutional investors had already quietly positioned themselves. By the time the official announcement was made on December 1st? The positive news had already been fully digested, and there was even a reverse situation—Bitcoin plummeted more than 5% that day, with over 190,000 people directly liquidated.

This is a typical case of the "news good news is exhausted" phenomenon. It looks like good news, but in reality, it has already been priced in. Later buyers who chase the price up? They can only become the targets of being cut.

**Why is it so easy to fall into pitfalls?**

Because beginners are easily deceived by the superficial policy benefits. Upon seeing the three words "tapering off the balance sheet," their minds automatically equate "point shaving = bull market" logic. But the market is not that simple. The policy signals have to go through many steps before they translate into actual liquidity release. Meanwhile, the smart money has already made its move.

Similar lessons were learned in 2019. At that time, many people also fell into the trap - misreading the policy, thinking that a bull market was coming, and what happened? Monthly-level fluctuations directly caused those who blindly chased highs to lose 30%.

**What is the actual insight?**

Favorable policies do not mean that the market will rise immediately. On the contrary, many times, the moment the news is announced is already when various funds are cashing out. The real opportunities often lie in the advance layout period of news expectations. By the time the entire network is cheering, it is mostly already at the position of taking over.

This time the shrinkage policy is the same. Stopping the shrinking itself does help improve liquidity, but don’t think of it as some magic wand that can instantly kick off a big market trend. The logic of the market is far more complex than one might imagine.