Key Points:
The yield on the 10-year U.S. Treasury bond has decreased, highlighting a rise in risk-averse sentiment and an increased demand for safe-haven assets.
The Bitcoin spot ETF attracted $430 million in inflows, while the stock market remains sluggish, indicating that Bitcoin may be decoupling from traditional markets.
After the U.S. federal government shutdown, Bitcoin (BTC) reached a two-week high on Wednesday. However, investors remain cautious, recalling that the 2018 shutdown triggered sell-offs due to concerns over economic growth slowing.
With no solution reached, federal agencies have been asked to initiate emergency measures, forcing hundreds of thousands of employees to stay home. Market attention is now focused on the duration of the shutdown, with the next Senate vote scheduled for Wednesday.
The Trump administration has warned that if an agreement cannot be reached, large-scale layoffs may be implemented, a threat that has made traders more cautious and inclined towards risk aversion.
On Wednesday, the yield on the 10-year U.S. Treasury bond fell, indicating that traders are willing to accept lower returns for the safety of government-backed bonds. Gold also surged to a record $3,895 per ounce, reflecting increased demand for traditional safe-haven assets.
At first glance, the government shutdown seems to provide a short-term boost for Bitcoin, but its sustainability remains in question. The immediate reaction in the U.S. stock market was limited; however, data from ADP added pressure: it showed a decrease of 32,000 jobs in the private sector in September, while August data was revised to a net loss of 3,000 positions.
During the U.S. government shutdown in December 2018, Bitcoin fell by 9%. This time, due to a significant slowdown in government spending and delays in official data releases, the economic drag may quickly become apparent.
Just 10 days before the U.S. government shutdown on December 22, 2018, the U.S. stock market began a 12% correction, but the entire decline was fully recovered in less than a month. Those who held their positions and ignored short-term fluctuations ultimately benefited.
However, for Bitcoin, the December 2018 shutdown had a slight negative impact, with the price dropping from $3,900 to $3,550 during the 35-day stalemate. At that time, the cryptocurrency faced greater challenges, as Bitcoin had already fallen 42% in the two weeks leading up to November 25, 2018. Some analysts believe that stricter regulatory measures were a catalyst for this significant sell-off.
In October 2018, the Financial Action Task Force (FATF) updated its guidelines to include virtual asset activities under regulatory oversight, including cryptocurrency exchanges and certain wallet service providers. This intergovernmental organization represents about 200 jurisdictions, focusing on anti-money laundering and counter-terrorism financing. Traders may anticipate that regulatory scrutiny will further intensify.
On Tuesday, the Bitcoin spot ETF saw a net inflow of $430 million, and with the recent decoupling of this asset from the stock market, it further solidified its reputation as an independent safe-haven tool. These ETFs currently manage nearly $147 billion in assets, while the gold market is valued at $26 trillion, with approximately $461 billion in assets supported by ETFs.
The current situation indicates that even if short-term economic weakness puts pressure on traditional markets, the government shutdown may be beneficial for Bitcoin in the next 30 days. The ongoing demand for Bitcoin as a reserve asset by businesses will also provide significant support for its bullish momentum during highly uncertain times.
This article is for general informational purposes only and does not constitute and should not be construed as legal or investment advice. The views, thoughts, and opinions expressed in this article are solely those of the author and do not necessarily represent or reflect the views or positions of Cointelegraph.
Related: BitMine expands Ethereum treasury holdings to 2.65 million, Tom Lee says ETH is trading at a "future discount price"
Original article: “Bitcoin Rallies as U.S. Government Shutdown Begins: Will BTC Gains Continue?”
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