Crypto markets hold firm as U.S. government shutdown begins

The U.S. government went into official shutdown at 12:01 a.m. Wednesday, after Congress failed to pass funding legislation. While non-essential federal employees are being furloughed and many services are suspended for the time being, essential functions will keep running.

The crypto market is seemingly unaffected by the development. Total digital asset capitalization is holding above the $4 trillion threshold recaptured earlier this week. Bitcoin continued its two-day rally, rising from approximately $108,650 to around $114,000 before easing slightly back down.

Ether has surged to $4,300, registering notable gains. Altcoins had modest losses, in line with recent trends. Analysts noted a bullish double bottom on Bitcoin’s chart, which is always seen as a sign of bigger rallies. Derivatives platforms saw some short liquidations of $300-400 million in two days, intimating that over-leveraged traders were caught off guard. Despite the shift, volumes of trade are still relatively low compared with earlier this year.

Historic shutdowns show Bitcoin’s mixed past

The ongoing standoff in Washington has direct implications for crypto regulation. The Securities and Exchange Commission (SEC), already struggling with pressure over its handling of digital asset approvals, will be compelled to operate with a reduced staff. While the necessary enforcement will proceed, rulings on long-expected spot altcoin ETFs are getting more delays. Each day of the shutdown is pushing back approvals that could impact market direction.

Historical trends show mixed results for Bitcoin due to past shutdowns. In October 2013, a 16-day closure caused Bitcoin’s value to increase by 14% from $132 to $151. In contrast, the 35-day shutdown that began in December of 2018 saw prices drop by 6% amid a broader bear market.

CryptoQuant head of research, Julio Moreno, pointed out that market conditions are more like 2013 than 2018, as Bitcoin is now in a bull cycle and demand is rising. Independent investor Ted Pillows, however, warned of volatility throughout the shutdown period, with even equities and digital assets not immune from short-term pullbacks. “I reckon this week it may cause significant volatility,” he noted.

Seasonal trends point to year-end upside

In addition to the short-term political risk, Bitcoin has seasonal factors on its side during the last quarter of the year. The average Q4 returns have exceeded 53% since 2015 whenever Bitcoin completed September in positive territory. Historically, October has been the best month, with an average of 21.8% gains. Bitcoin network economist Timothy Peterson noted that almost 60% of the cryptocurrency’s annual performance is after October 3, which is usually through midyear.

Funding expired after Senate votes failed to advance from both parties Tuesday night. Democrats called for alterations to Medicaid cuts and healthcare tax credits, and Republicans balked at concessions. Senate Minority Leader Chuck Schumer blamed Republicans for refusing to negotiate, and Vice President JD Vance blamed Democrats for failing to compromise. The deadlock is the 21st U.S. government shutdown since 1977.

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