Author: Stacy Jones, Decrypt

Translated by: Felix, PANews

As the possibility of a government shutdown increases, Bitcoin traders who rely on the upcoming U.S. employment data to gauge whether the Federal Reserve will cut interest rates again may need to wait a while.

Analysts say it remains uncertain how Bitcoin will react to such events, which could exacerbate volatility in the short term. The impact of past shutdowns on prices has varied.

Bitunix analysts stated, "Expectations of interest rate cuts are favorable for risk assets, but concerns about bubbles and political risks have heightened short-term volatility. For cryptocurrencies, this brings both liquidity support and increased downside uncertainty." "In the medium term, confirmation of rate cuts would improve liquidity and support risk assets. However, in the short term, concerns about bubbles and the risk of a government shutdown have increased vulnerability, making significant 'downward rebounds' more likely."

Unless Congress can pass a comprehensive funding bill or a continuing resolution by midnight Tuesday, federal funds will run out, and some government functions will shut down due to being deemed "non-essential." The federal government's fiscal year ends on September 30.

John Reid, head of macro and thematic research at Deutsche Bank, wrote in a report, "Major events this week may not occur, as if Congress cannot reach an agreement on a short-term funding resolution by midnight tomorrow, Friday's employment report may become the first high-profile victim of a potential government shutdown. In fact, during the government shutdown in October 2013, we did not receive the September employment report until the 22nd of that month."

As of the time of writing, Bitcoin has risen to over $114,000, up 3.8% in the past day. According to CoinGecko data, its price is still 0.7% lower than it was two weeks ago. Economic statistics and data processing are not considered essential functions, meaning the U.S. Bureau of Labor Statistics will need to delay the upcoming employment report until government funding is restored. This does not mean the data will not be released eventually, but the delay could exacerbate market volatility. Investors know that the Federal Reserve's monetary policy decisions largely depend on employment and inflation data.

Nansen research analyst Nicolai Sondergaard stated that a government shutdown could heighten short-term volatility in the cryptocurrency market.

But he added, "I do wonder if the situation would be different if a broad base of investors believes the 'shutdown' will be resolved quickly. Moreover, if a shutdown does occur, I wouldn't be surprised if its potential impact hits the broader financial markets before it actually happens."

This is not the first time the cryptocurrency market has experienced a government shutdown.

The government shutdown in October 2013 lasted for 16 days. From October 1 to October 17, Bitcoin's price rose by 14%, from $132.04 to $151.34. However, it is not a universal rule that Bitcoin rises during government shutdowns. The longest shutdown in history occurred from December 22, 2018, to January 25, 2019, lasting 35 days, during which Bitcoin's price fell by 6%, dropping from $3,802.22 to $3,575.85 by the end of the shutdown.

On the prediction market Myriad, users are increasingly skeptical about the Federal Open Market Committee making two interest rate adjustments in 2025. The number of skeptics has risen to 75%, up from 40% in early September.

Skeptics may include those who believe the Federal Reserve will adjust rates at both of the remaining Federal Open Market Committee policy meetings this year, as well as those who think the committee will wait until 2026 to consider rate adjustments.

Cryptoquant research director Julio Moreno stated that the market environment for Bitcoin during the government shutdowns of 2013 and 2018 to 2019 was vastly different. "In 2013, Bitcoin was in the final stages of a bull market cycle, with strong demand growth." He added that by the time of the 2018 government shutdown, Bitcoin's demand was shrinking during a bear market.

Moreno added that Bitcoin's situation today is more akin to 2013 than to 2018. "As we enter the fourth quarter, Bitcoin's demand is increasing, which is typically a quarter with positive price performance."

Related articles: Weekly Review of the Crypto Market (09.22~09.28): BTC fell 2.68% weekly, concerns about cycle peaks resurface

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