Bitcoin Hits $118K Following US Gov Shutdown. What Comes Next?

The key takeaways

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

• Spot Bitcoin exchange-traded funds (ETFs) saw $430 millions inflows, while equity markets remained muted. This could indicate a potential breakaway from the traditional market.

BitcoinBTC( ) hit a new two-week peak on Wednesday, following the shutdown of the United States Federal Government. Investors remain cautious as they recall that in 2018, the shutdown caused a drop due to concerns over a slower economy.

Federal agencies activated contingency plans because there was no solution in place. This forced hundreds of thousands to remain at home. Another Senate vote is scheduled on Wednesday to determine the length of this shutdown. 

Trump’s administration warned that it could pursue mass layoffs in the event of a failure to reach an agreement. This has caused traders to become more risk-averse and cautious.

The Yield on the US 10-year Treasury The price of debt backed by the government fell Wednesday. This shows that traders were willing to accept lower return in exchange for safety. The price of gold also soared, reaching a new record at $3,895 an ounce. This indicates a stronger demand for hedges.

The shutdown may have temporarily boosted Bitcoin’s value, but its long-term sustainability remains in doubt. US stocks showed no immediate response, but ADP’s data showing 32,000 less private payrolls for September and revised August numbers showing a loss of 3,00 jobs was a pressure.

Bitcoin fell 9% in the US Government Shutdown of 2018.

Bitcoin decreased by 9% in December 2018 when the US shutdown. The slowdown in government spending and delays with the publication of official statistics could cause the economy to suffer again.

Just 10 days before Dec. 22nd, 2018, the US stock market experienced a 12% decline. The full drop was reversible in less that a month. Investors who held onto their positions and saw past short-term fluctuations ultimately ended up winning.

Bitcoin’s price fell from $3.900 to $3.550 over the course of the 35-day shutdown in December 2018. Cryptocurrency faced bigger challenges, however, as it had already fallen 42% over the previous two weeks, leading up to November 25, 2018. Analysts argued that the steep sell-off was caused by stricter regulations.

The Financial Action Task Force, or FATF (Financial Action Task Force), held its October 2018 meeting. updated its guidelines The act covers virtual asset activities, such as cryptocurrency exchanges and some wallet providers. This intergovernmental organization, which is composed of 200 countries, has a mandate that focuses on anti-money laundering and counter-terrorism funding. The traders may have expected heightened regulation scrutiny.

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

In total, $430 Million in net inflows into spot Bitcoin ETFs On Tuesday, the recent decoupling of this asset from stocks has enhanced its reputation. They now control nearly $147billion in assets. Meanwhile, gold is supported by $461billion through ETFs, representing a market of $26trillion.

The current conditions indicate that the shutdown of the federal government could be favorable to Bitcoin in the coming 30 days, despite the fact that short-term weakness on traditional markets is a concern. In a time of uncertainty, the continued demand from corporations for Bitcoins as reserve assets will play an important part in maintaining bullish momentum.

The article does not provide legal advice or investment recommendations and it is intended for informational purposes only. This article is solely for informational purposes. It does not represent or reflect Cointelegraph’s views.