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

The key takeaways

• The yields of US Treasury 10-year bonds declined. This reflects a growing risk-aversion, and demonstrates heightened demand for assets that are considered safe havens.

• 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.

BitcoinBTCThe dollar reached its highest level in two weeks on Wednesday after the United States government shut down. But investors are cautious. They remember that last year’s shutdown led to a market sell-off due to fears of slower economic growth.

Even though there is no agreement, the federal agencies have been ordered to take contingency actions, which has forced thousands of workers 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 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. 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 stocks responded little to the shutdown, although ADP figures showed that private payrolls were down 32,000 in September. August’s numbers had been revised and now show a net reduction of 3,000.

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.

Just 10 days before Dec. 22nd, 2018, the US stock market experienced a 12% decline. The full drop was reversed within 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. Yet, Bitcoin faced greater problems at that 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 – 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. Some traders might have been expecting increased regulatory 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 On Tuesday, the recent separation between this asset and equities has further cemented its status as an independent hedge. The vehicles manage $147 billion worth of assets. Gold, which is a market valued at $26 trillion, provides $461 billion via ETFs.

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 sentiment.

The information contained in this article is meant to provide general knowledge and not as investment or legal advice. This article is solely for informational purposes. It does not represent or reflect Cointelegraph’s views.