The potential consequences of a government shutdown in the United States are casting a shadow over various markets, including cryptocurrencies like Bitcoin. Previously, we have tackled how Bitcoin can pose as a hedge against these instances, but what do other analysts say about it?
This article explores the projected effects of a government shutdown on the cryptocurrency space, drawing insights from various experts and sources.
Macroeconomic Uncertainty and Bond Market Distress
Cryptocurrencies have emerged as a unique asset class that often reacts to macroeconomic events. Noelle Acheson, a macro analyst and author of Crypto Is Macro Now newsletter, highlights the significance of prevailing macro uncertainty. Bond markets worldwide are showing signs of distress, with yields reaching multi-year records in countries like the US, UK, Germany, and Japan.
The potential US government shutdown adds another layer of uncertainty to this already complex situation. This looming shutdown could further impact financial markets and consumer spending. Acheson points out that the revised lower growth in US consumer spending during Q2 suggests that consumers may not be as resilient to tightening financial conditions as previously thought.
Cryptocurrency Markets’ Resilience
Interestingly, despite the challenging macroeconomic environment, cryptocurrency markets have demonstrated resilience compared to traditional stock markets. Asgard Markets, an advisory firm, notes that during past government shutdowns, the S&P 500 saw gains approximately 55% of the time, generating an average return of 0.3%.
This suggests that cryptocurrencies may provide an alternative refuge for investors during uncertain times.
Regulatory Delays and the SEC’s Reduced Staff
Meanwhile, the government shutdown’s impact on regulatory decisions within the cryptocurrency space cannot be overlooked. US Securities and Exchange Commission (SEC) Chair Gary Gensler confimed that his agency’s staffing will be significantly reduced by 90% to a mere skeletal workforce during a shutdown, potentially leading to delays in regulatory approvals.
With that, the approval of a spot Bitcoin exchange-traded fund (ETF) may have to wait further until after SEC employees return from a potential furlough.
Bitcoin’s Price Forecast
Despite the uncertainties surrounding a government shutdown, experts are cautiously optimistic about Bitcoin’s price in the coming months. Asgard Markets suggests that Bitcoin (BTC) and Ethereum (ETH) are currently attempting to break out of their previous trading range. They anticipate a short-term price movement between $28,500 and a potential surge to $30,000, as long as Bitcoin remains above $26,000.
Historical data also provides some hope for Bitcoin investors. Over the last decade, October has generally been a bullish month for Bitcoin. Markus Thielen, Head of Research at Matrixport, points out that eight out of the last ten Octobers have seen an average market gain of approximately 22%. Thielen also believes that once interest rates become dovish, Bitcoin is poised for a significant breakout.
Bitcoin Miners and Efficiency
Another factor impacting Bitcoin’s price is the efficiency of Bitcoin miners. Marathon Digital, a prominent player in the mining industry, is expected to operate with more efficient operations in the upcoming quarter. Despite potential increases in mining costs, experts suggest that Bitcoin’s price needs to rally above $30,000 to see substantial gains.
The potential effects of a government shutdown on Bitcoin and cryptocurrency prices are intertwined with broader macroeconomic uncertainties and market dynamics. While cryptocurrencies have shown resilience in the face of such uncertainty, regulatory delays and reduced SEC staff could introduce complexities.
Nevertheless, experts remain cautiously optimistic about Bitcoin’s price, pointing to historical trends and the potential for more efficient mining operations as reasons for hope in the crypto market.
Giancarlo is an economist by profession with a career spanning nearly two decades. His professional journey has seen him assume vital roles in various government and private organizations such as the Department of the Interior and Local Government (DILG), the National Economic and Development Authority (NEDA), Megaworld Corporation, and the China Banking Corporation in the Republic of the Philippines.
In addition to his civic and corporate pursuits, his forward-thinking approach has led him to manage several prominent websites in the banking and finance sector, notably the Australia-based RateChoice, where he immersed himself in the world of emerging financial technologies and where he found particular interest in Bitcoin all the way back to 2013.
Prior to his addition to Blockzeit’s dynamic team, he held an essential role as Project Manager for initiatives encompassing blockchain, stablecoin, mining, special economic zone development, and iGaming. This noteworthy chapter in his career unfolded under the auspices of InPlan Consultancy Services, Inc., the think-tank of IMPERO Consortium Management Corporation headquartered in Manila, Philippines, and Tokyo, Japan. InPlan, led by a distinguished retired Cabinet member of the Philippines, collaborates directly with IMPERO’s core management team, contributing to strategic planning and business development endeavors.