Why Bitcoin Is Surging Today

Key Points

• Large whale investors appear to be buying up Bitcoin.

• Bitcoin is an alternative currency to the mainstream financial system.

• It could serve as a hedge to a government shutdown occurring, with the deadline looming tomorrow.

• 10 stocks we like better than Bitcoin ›

Since yesterday afternoon, Bitcoin (CRYPTO: BTC), the world's largest cryptocurrency, traded 4.2% higher, as of 11:16 a.m. ET today. There is no obvious reason behind the move, but a few different things could be driving it.

How a government shutdown could impact crypto

According to data from blockchain trackers, some large whale investors have moved in recently and bought up Bitcoin, reversing some of the liquidations seen last week.

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But the bigger event potentially impacting Bitcoin and the broader crypto market is the possibility of a U.S. government shutdown. Lawmakers have until tomorrow to further fund the government and avoid a shutdown that would close certain parts of the government and create a big disruption.

Democrats are seeking to tie further federal funding to continuing tax credits associated with Obamacare that are set to expire by year-end. Meanwhile, President Trump and the Republicans have vowed broad layoffs of government workers if a shutdown occurs, setting up a showdown.

While a shutdown could stall certain crypto initiatives, Bitcoin launched in the wake of the Great Recession. People were fed up with the mainstream financial system and sought alternatives. So when shutdowns or other events that adversely affect the mainstream financial system occur, investors can buy Bitcoin essentially as a hedge.

All eyes on the deadline

Continuing to fund the government has become extremely political over the years, and shutdowns have actually happened on several occasions. The longest government shut down started in 2018 and lasted 34 days, so while they do happen, they don't last very long, primarily because they can be bad for both parties politically and hurt the economy.

A shutdown could turn into a good near-term catalyst for Bitcoin. However, Bitcoin is one of the few tokens I think investors can buy and hold long term, so I would focus more on the long-term trajectory of Bitcoin and less on trying to trade this event.

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Bram Berkowitz has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.