Crypto and Markets Rebound as 40-Day U.S. Government Shutdown Nears End

The troublesome 40 days of government shutdown had caused major problems for the market. Bitcoin was unable to make the traditional November bull run into the 2nd week of November, payments were stuck, systems lagged, and all hell broke loose.

However, things seem to be taking a turn for the better as a bill is being pushed forward that could potentially end the 40-day government shutdown. With this newfound hope, the markets seem to be waking up after their unexpected hibernation period.

This news has sparked industry-wide enthusiasm. This is especially true for Bitcoin, as this could mean a lot for BTC in terms of breaking the current price stagnation and starting a new bull run. Historically, previous shutdowns and their terminations have had an effect on the price of Bitcoin in a positive way. There have been instances where Bitcoin has climbed a whopping 300% in 5 months post another government reopening.

The 2019 Bitcoin Bull Run

Similar to the present shutdown of the US government, in 2019, during the first Trump administration, Trump had to make a similar shutdown. This shutdown had similar effects and severe implications on all markets.

Even though Bitcoin only slipped slightly during this past shutdown that lasted from Dec 22, 2018, to Jan 25, 2019, the comeback was superb. Bitcoin rose approximately 300% over the course of 5 months after the federal government shutdown came to an end.

Even though there is no clear evidence that could tether the rise in BTC prices to the end of the shutdown, experts see this event as having ripple effects over a freshly reopened market.

Will The Current Shutdown’s End Have An Effect on Crypto?

The answer everyone is seeking to the question above is a very complicated one. While such a major global event probably could affect the market, to what extent it will affect the crypto market is largely uncertain.

Trying to project the 2019 event onto the current scenario could be a wrong move, as this is not one of the history-repeats-itself events. There isn’t enough data that make a strong case about Bitcoin or any other crypto in the market, making a strong bull run just because a 40-day government shutdown has come to an end.

However, broader events that closely precede this shutdown may affect the crypto market. One of the major reasons is the introduction of crypto ETFs to the market. Before the shutdown, the SEC(Securities and Exchange Commission) was on the brink of approving several crypto ETFs, including XRP and PEPE – a memecoin. However, before this could become a reality, the shutdown came in full force, and soon the SEC was heavily understaffed.

This led to a huge delay that potentially affected the prices of the cryptocurrencies involved. Without the much-expected institutional funding, many cryptocurrencies struggled to stay afloat and kept falling and breaking their key support levels. However, the performance of these crypto assets was already affected, and the institutional funding could have saved them with added liquidity.

So, if the shutdown ends, there is a high chance that these ETFs could hit the market as expected. This could have a very positive impact on the prices of risk assets like cryptocurrencies, as institutional funding and association give them more credibility in the market.

Effects of The Shutdown’s End on Other Markets

The government shutdown’s ending has several market implications. These work differently for different markets. Generally, this end to the government shutdown is viewed as a political conflict that has been resolved. This generally gives the market the energy to make a fresh start.

There will be a short-term relief rally among risk assets like stocks(S&P500, Nasdaq). These markets often see a small bounce in light of events such as the shutdown being removed. This is because the uncertainty that persisted regarding federal spending has ended, and the real-world market has been revived.

When it comes to more stable assets like treasury bonds, the shutdown will have likely spooked the investors. This happens because treasury auctions and debt-relief negotiations often happen during shutdowns. Once the shutdown is over, this market will find its lost stability.

The US dollar and the macroeconomic factors will also find themselves strengthened. This is courtesy of the removal of the political insecurity that was casting a shadow on the future of all stakeholders involved in the process.

Conclusion

In general, with the shutdown hopefully nearing its end, the market and associated entities have recovered their optimism. This reopening marks not just a political conflict being resolved, but it has broader implications on markets reopening, funding flows getting straightened, workers getting their payments, aid getting reestablished, and a revived national economy. Hence, the atmosphere has shifted radically.

This could have impacts in both directions, as the general trend of investors can shift from risk assets as their risk appetite is lost in the shutdown. If the market is in such a lack of risk appetite, crypto could sink rather than build a bullish momentum; at the same time, steady and stable investments like bonds will find a stronger foothold.

The entry of ETFs could also change the market dynamics and may increase the risk appetite. If this happens, the crypto market could be in for a surprise rally. Overall, the end of the shutdown represents a much-needed reset for both traditional and digital markets, setting the stage for renewed growth.