Recently, the Federal Reserve cut interest rates by 25 basis points again, and the outcome is quite interesting——Bitcoin surged all the way to the $117,000 mark but then turned back. The altcoin market is even more outrageous; the total market cap just hit a new high of $1.72 trillion and then fell back. Some might find this phenomenon inexplicable, but there is actually a logical behind it.

In simple terms, different sizes of crypto assets respond completely differently to easing policies. Rate cuts, on the surface, make risk assets look more valuable—because the money you keep in the bank yields little, so you might as well take some risks. But the problem is, capital doesn't flow all at once; it follows a sequence.

**Where does the money go first? It definitely goes to Bitcoin.**

Institutional investors hold large amounts of capital that need allocation, and their first choice is Bitcoin. Why? Because of good liquidity, relatively controllable risk, and the official ETF channels. Just one major management company's Bitcoin fund has an asset management scale of $51 billion. What does that mean? The fund can have a daily inflow of $1.2 billion. Such a large amount can only be absorbed by Bitcoin.

So, it's no surprise that Bitcoin surges first——it's the first stop for institutional capital.

**After Bitcoin stabilizes, the money flows into altcoins.**

Interestingly, once Bitcoin starts consolidating sideways, funds begin looking for the next destination. Altcoins become the preferred choice because of higher yields and greater imagination space. Back in September, the seasonal index for altcoins hit 82, with tokens like Solana and XRP being revalued due to the concept of real asset tokenization, attracting a wave of capital.

But there are also many issues here. The liquidity in the altcoin market isn't as deep, and leverage is more prevalent. In just two weeks, open positions in altcoins jumped from $3 billion to $3.86 billion. It looks hot, but in reality, it's fragile——if a big player shorts, those retail investors blindly chasing the rally will be liquidated. The result is increased volatility, which scares away rational capital.

**Why does this happen? Essentially, it's a difference in risk pricing.**

Bitcoin acts as a "liquidity anchor"——when the market is stable, everyone looks at it for direction; altcoins, on the other hand, become "volatility amplifiers"——when there's a market disturbance, their declines can be several times that of Bitcoin.

This "see-saw effect" isn't a bug but a reflection of market rational pricing. Because of its large size and high acceptance, Bitcoin has a strong capacity to absorb macro liquidity; altcoins, lacking this ability, become a casino for chasing excess returns. Institutions understand this well, so their strategy is clear: first, allocate to Bitcoin to lock in returns, then use a small portion of funds to try their luck with altcoins.

Ultimately, this is an orderly flow of capital——it may look chaotic, but each step is driven by economic logic. Next time you see such market behavior, you'll understand the underlying operational principles.