The Impending US Government Shutdown Impacts Cryptocurrency Markets

As discussions about the debt ceiling and government shutdown continue, cryptocurrency enthusiasts find themselves navigating a host of new and intriguing scenarios. Recently, the Senate’s Schumer announced that the House Speaker’s decision to send members home led to the closure. Here, we explore what the US government shutdown might imply for the crypto markets and the broader US economy.

Understanding the US Government Shutdown

For the first time since 2018, the US government is on the cusp of a shutdown. The previous longest shutdown occurred during Trump’s presidency, spanning 35 days and beginning in December. Typically, such shutdowns last around eight days, and experts are hopeful for a resolution by the weekend this time as well. The TKL has shared a graphical representation of previous shutdown durations.

What Does a Government Shutdown Entail?

During a shutdown, all non-essential government operations halt. Critical services continue, but approximately 750,000 employees are furloughed, meaning numerous processes come to a standstill. Tomorrow is set to finalize the shutdown, with today’s announcements indicating its inevitability. Moreover, BLS reports may face delays during this period, potentially affecting the release of Friday’s data.

Market Reactions to Government Shutdowns

Bitcoin has approached the $114,400 mark, reaching daily highs, while altcoins have shown little increase. Historically, shutdowns have often had positive outcomes for the S&P 500. If this shutdown doesn’t exceed 2018’s length and no drastic actions occur, the end of the shutdown might spur further market ascension.

Since 1995, markets have consistently risen after each shutdown period. Trump announced the likelihood of a shutdown, with Kalshi contracts estimating an 87% probability of its occurrence in the next 8 hours. Moreover, the official US government website reports a drastic decrease in job postings, dropping from over 10,000 to around 1,300.

During this time, gold prices might see an uptick and have been gearing up for it. With a 45% annual increment, it could rise an additional 10%. Should 2025 mark the best year for gold since 1979, this period could be pivotal.

The US dollar is weakening, marking its poorest year since 1973. Apollo suggests that this drop in DXY could lead to increased inflation rates.

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