The government shutdown or delay in the release of non-farm employment data may exacerbate cryptocurrency volatility this week.
Written by: Stacy Jones
Translated by: Chopper, Foresight News
TL;DR
If the U.S. government faces a shutdown, the non-farm employment report scheduled for release on Friday may be delayed. This data is a key basis for Bitcoin traders to predict whether the Federal Reserve will cut interest rates.
Bitcoin's price has surpassed $114,000, but due to the uncertainty surrounding the shutdown, it is still 0.7% lower than two weeks ago.
Historical data shows that the impact of government shutdowns on Bitcoin has been mixed: during the 2013 shutdown, Bitcoin rose by 14%, while during the 2018-2019 shutdown, it fell by 6%.
Bitcoin traders had hoped to use the upcoming U.S. employment data to gauge whether the Federal Reserve would cut interest rates again. However, with the U.S. government on the brink of a shutdown, they may have to wait some time to obtain this crucial data.
Analysts indicate that Bitcoin's response to a government shutdown remains uncertain, which could intensify short-term market volatility. The performance of Bitcoin's price during the last two government shutdowns was markedly different.
"Expectations of interest rate cuts support risk assets, but concerns about bubbles and political risks can amplify short-term volatility. For cryptocurrencies, this brings both liquidity support and increased downside uncertainty," wrote Bitunix analysts in a report sent to Decrypt. "In the medium term, confirming rate cuts will improve liquidity, thereby supporting risk assets; but in the short term, bubble panic and shutdown risks will exacerbate market fragility, making sharp fluctuations more likely after a sudden drop."
If Congress fails to pass a complete appropriations bill or a temporary spending bill by midnight Tuesday, federal government funding will be interrupted, and "non-essential" government functions will face a partial shutdown. The U.S. federal government's fiscal year ends on September 30.
"The highlight of this week (the non-farm employment report) may not go as scheduled. If Congress cannot reach a consensus on a short-term funding bill by midnight tomorrow, the non-farm employment data set to be released on Friday may become the first high-profile casualty of the government shutdown," noted John Reid, head of macro and thematic research at Deutsche Bank, in a report sent to Decrypt. "In fact, during the government shutdown in October 2013, the employment report for September was not released until the 22nd of that month."
As of the time of writing, Bitcoin has risen 3.8% in the past 24 hours, with its price surpassing $114,000. However, according to data from cryptocurrency price aggregation platform CoinGecko, this price is still 0.7% lower than two weeks ago.
Economic statistics and data processing do not fall under "essential government functions," which means the U.S. Bureau of Labor Statistics will have to suspend the release of the upcoming employment report until government funding is restored. The data may still be released, but its delay could trigger market volatility. Investors are well aware that the Federal Reserve's monetary policy decisions are heavily influenced by employment and inflation data.
Nansen research analyst Nicolai Sondergaard told Decrypt that a government shutdown could exacerbate short-term volatility in the crypto market.
"But I'm not sure if the impact will be greater. If most investors believe the shutdown issue can be resolved quickly, the situation may be different," he added. "Moreover, even if it does have an impact, the potential effects of the shutdown may have already shaken the overall financial market before it occurs, and I wouldn't be surprised by that."
The crypto market has not experienced a government shutdown for the first time.
The government shutdown in October 2013 lasted for 16 days. From October 1 to October 17, Bitcoin's price rose from $132.04 by 14% to $151.34.
However, "Bitcoin must rise during a shutdown" is not a rule. The longest government shutdown in U.S. history occurred from December 22, 2018, to January 25, 2019, lasting 35 days. During this period, Bitcoin's price fell by 6% from $3,802.22 to $3,575.85 by the end of the shutdown.
On Myriad, a prediction market under Dastan, the parent company of Decrypt, skepticism about whether the Federal Open Market Committee (FOMC) will adjust interest rates twice in 2025 is growing. The proportion of skeptical users has risen to 75%, significantly higher than the 40% in the first week of September.
Among these skeptics, some believe the Federal Reserve will adjust interest rates in both of the remaining FOMC policy meetings this year, while others think the Fed will wait until 2026 to consider further adjustments.
Cryptoquant research director Julio Moreno stated that the market environment for Bitcoin during the government shutdowns in 2013 and 2018-2019 was entirely different. "During the 2013 government shutdown, Bitcoin was in the final stage of a bull market, with strong demand growth," he explained to Decrypt. "By the time of the 2018 shutdown, Bitcoin was in a bear market, with demand continuously shrinking."
Moreno added that Bitcoin's current market positioning is closer to that of 2013 rather than 2018.
"As the fourth quarter approaches, Bitcoin demand is increasing. Historically, the fourth quarter is usually a good quarter for Bitcoin's price performance," he said.
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