Bitcoin hits $118K after US Government Shutdown. What 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 assets.

• 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.

As there is no agreement, agencies are forced to take contingency actions, which means that hundreds of millions of workers will be staying home. Another Senate vote is scheduled on Wednesday to determine the length of this shutdown. 

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.

Earnings from 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. Gold prices also rose to an all-time high of $3,895 for one ounce.

The shutdown may have temporarily boosted Bitcoin’s value, but its long-term sustainability remains in doubt. 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 loss of 3,00 jobs.

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

Bitcoin decreased by 9% in December 2018 when the US shutdown. 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 ten days prior to the shutdown. However, the entire decline reversed itself in less than one month. Investors who held onto their positions and could look past short-term fluctuations ultimately came out on top.

Bitcoin prices fell slightly from $3.900 down to $3.550 in the 35 days of the standoff. However, Bitcoin faced bigger challenges than that at the time. It had dropped by 42% over the previous two weeks, leading up to the 25th of November 2018. Analysts argued that the steep sell-off was caused by stricter regulations.

Financial Action Task Force (FATF), in October 2018, updated its guidelines The act covers virtual asset activities, such as cryptocurrency exchanges and some wallet providers. Intergovernmental organisation representing about 200 jurisdictions. Its mandate is Anti-Money Laundering, and Counter-Terrorism Financing. The traders may have expected a tightening of regulatory oversight.

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 $26trillion market.

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. These are solely the opinions, views, and thoughts of the author and may not reflect the opinions and views of Cointelegraph.