The clock is ticking to determine whether Congress will pass spending legislation for the federal government before fiscal year 2024 begins on October 1. If lawmakers are unable to renew funding before that critical deadline, which seems more likely, a large number of governments operations would cease.
For cryptocurrency investors, what impact, if any, does a government shutdown have on the price of bitcoin (BTC-USD)? Looking for alpha analyst Giesber's investment strategy discovered the price action of bitcoin, widely seen as an indicator of the broader crypto market, during the three previous closes. In the most recent, from December 22, 2018 to January 25, 2019, the digital token fell 9.8%. This followed a 15.7% drop in the January 20-23, 2018 close and a 7.8% rise in the October 1-16, 2013 close.
Keep in mind that there have only been three government shutdowns during Bitcoin's existence, "so there's not a lot of data here," Giesbers said. noted this past week.
The contributor argued that, during these government shutdowns, other sources of volatility influenced bitcoin (BTC-USD) more than the volatility derived from closures. And in 2013, bitcoin (BTC-USD) popularity was only a fraction of what it is today, "and people especially did not see it as a safe harbor in case of financial turmoil."
In other words, BTC was a beast unto itself and “I think a government shutdown will not lead to a rally in the price of Bitcoin,” he predicted.
When it comes to the regulation of crypto securities, one of the most important forces driving cryptocurrency prices, a shutdown would result in delayed regulatory decisions, including issues related to cryptocurrency exchange-traded funds, as the Commission The Securities and Exchange Commission would face substantial staff reductions. Financial heavyweights like BlackRock (BLACK) and Fidelity Investments have been competing to be the first to market a US ETF that invests directly in bitcoin (BTC-USD). Therefore, a delay in a possible SEC approval for such a product could lead to further uncertainty.
Some cryptocurrency investors have become optimistic about the prospect of a government shutdown, with bitcoin (BTC-USD) ready to close the week ending on September 30 almost 3% higher, with the idea that non-sovereign currencies would not be affected by the government procedure. Others, however, have argued that a government shutdown risks a drain on liquidity in financial markets as investors flock to safer assets, so bitcoin could suffer unexpectedly in the wake of a further selloff. extensive, at least in the short term.
“Cryptocurrencies have always grown in an economic recession. If you look at the beginnings of bitcoin, it was founded as a direct result of a major financial crisis caused by the banks. “Every financial crisis helps highlight bitcoin’s strength as a decentralized asset not controlled by banks or governments,” said Stefan Rust, CEO of independent inflation data aggregator Truflation.
Meanwhile, traditional alternative assets like gold (HAUUSD: CUR), as well as the stock market (SP500), are on track to end the week in the red, suggesting that "the market could view bitcoin as a 'flight to safety' asset during a time of instability," said David Waugh, principal analyst at Coinbits.
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