Bitcoin hits $118k after US government shutdown: what’s next?

The key take-aways

• US Treasury yields have declined in recent months, reflecting a rising risk-aversion as well as heightened demand from investors for safety assets.

• Spot Bitcoin ETFs saw inflows of $430 million while stocks remained quiet, signaling a possible decoupling with traditional markets.

BitcoinBTCThe dollar reached its highest level in two weeks on Wednesday after the United States government shut down. Investors remain cautious as they recall that in 2018, the shutdown caused a drop due to concerns over a slower economy.

In the absence of a resolution, agencies have been ordered to take contingency actions, which has forced thousands of federal employees to work from home. The focus now shifts to the duration of the shutdown with a Senate vote set for Wednesday. 

Trump has threatened to lay off thousands of workers if an agreement cannot be reached. The threat has made traders cautious and more risk averse.

The Yields of the US 10-year Treasury On Wednesday, the price of government debt fell. Traders are now willing to take a smaller return for security. Gold prices also rose to an all-time high of $3,895 for one ounce.

Bitcoin may seem to benefit from the shutdown in the short term, but there are still questions about its longevity. US stock markets showed little reaction to the shutdown, although ADP data pointed to 32,000 private payrolls less in September. August’s figures had been revised and now show a net reduction of 3,000 positions.

Bitcoin dropped 9% due to the US shutdown in 2018.

Bitcoin fell by 9% when the US Government shut down on December 18, 2018. The economic slowdown could be felt quickly this time as the government’s spending is expected to drop sharply, and official data will take longer to release.

In the US, the stock market started a correction of 12% just 10 days prior to the shutdown. However, the entire decline reversed itself in a little over a month. Investors that held on to their positions, and ignored the volatility in the short term, ultimately won out.

Bitcoin’s price fell from $3.900 to $3.550 over the course of the 35-day shutdown in December 2018. Despite this, Bitcoin faced greater challenges than ever before, as it had already fallen 42% over the previous two weeks, leading up to November 25, 2018. The sharp drop in cryptocurrency prices was attributed by some analysts to stricter regulation.

The Financial Action Task Force, or FATF (Financial Action Task Force), held its October 2018 meeting. updated its guidelines To cover the virtual assets activity including cryptocurrency exchanges, and certain wallet providers. Intergovernmental organisation representing about 200 jurisdictions. Its mandate is Anti-Money Laundering, and Counter-Terrorism Financing. The traders may have expected heightened regulation scrutiny.

Related: US Senate to hold hearing on crypto taxes as IRS offers relief on corporate tax

This $430,000,000 in net inflows into spot Bitcoin ETFs The recent separation of the asset from equity has strengthened its reputation as a hedge. The vehicles manage $147 billion worth of assets. Gold, which is a market valued at $26 trillion, provides $461 billion via ETFs.

Current market conditions point to the possibility that Bitcoin could benefit from the government shutdown over the next thirty days, even though short-term weakening of traditional markets will continue. In a time of increased uncertainty, the continued demand from corporations for Bitcoins as reserve assets will play an important part in maintaining bullish momentum.

This is not a legal or investment advisory article. It is only intended as a general guide. This article is solely for informational purposes. It does not represent or reflect Cointelegraph’s views.