Bitcoin hits $118K after US Government Shutdown. What Next?

Takeaways from the conference:

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

Since there is no agreement, agencies have been forced to take contingency actions, which has resulted in hundreds of thousand of workers being sent 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.

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 net reduction of 3,000 positions.

Bitcoin dropped 9% due to the US shutdown in 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 10 days prior to the shutdown. However, the entire decline reversed itself in less than one month. Investors who were able to hold their positions and ignore the short-term fluctuations ended up winning.

Bitcoin prices fell slightly from $3.900 down to $3.550 in the 35 days of the standoff. Still, cryptocurrency was facing greater problems at that time. It had dropped by 42% over the previous two weeks, leading up to the 25th of November 2018. The sharp drop in cryptocurrency prices was attributed by some analysts to stricter regulation.

Financial Action Task Force October 2018 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. 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 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.

At the moment, the current economic conditions are indicating that the government shutdown may be good for Bitcoin during the next thirty days. The continued corporate demand for Bitcoin to be used as a safe-haven asset will also play a major role in sustaining bullish momentum.

This is not meant to provide investment or legal advice. This article is solely for informational purposes. It does not represent or reflect Cointelegraph’s views.