Crypto Markets Rebound During U.S. Government Shutdown
The cryptocurrency market is seeing renewed strength as the United States enters its second day of a partial government shutdown. Bitcoin reached $121,000 on Thursday for the first time since mid-August, while Ethereum traded above $4,500, marking its highest level in three weeks.
Shutdown Has Limited Impact on Risk Assets
The partial closure followed a missed funding deal in Washington. While the shutdown brings uncertainty for federal workers, past closures have not dampened performance in equities or risk assets. Data shows the S&P 500 has gained during every U.S. government shutdown since 1990, and Bitcoin has been tracking this index closely into 2025.
Comparisons to Gold and Market Sentiment
Bitcoin is also mirroring a rally in gold markets. Gold set a new all-time high above $3,900, while JPMorgan analysts noted that Bitcoin appears undervalued compared to gold on a volatility-adjusted basis. These analysts suggest that Bitcoin could have further upside by year-end. Retail investors are said to be fueling demand for both gold and Bitcoin as a way to hedge against inflation, government deficits, and fiat currency devaluation.
John Haar, managing director at Swan Bitcoin, remarked that, "Over the longer term, with global debt at record highs and fiat currencies under pressure, bitcoin is increasingly seen as a liquid, non-sovereign reserve asset." He added that market dynamics are shifting from short-term speculation to longer-term strategic allocations, which could push Bitcoin to new highs.
October Optimism and Equity Strength
October has historically been a strong month for Bitcoin, with average gains of over 14% since 2013, a trend that continues this year. Gadi Chait, head of investment at Xapo Bank, indicated that the current government shutdown has not halted crypto momentum, highlighting Bitcoin's resilience.
Crypto-related equities are also benefitting from the rebound. Shares in Coinbase rose more than 7%, while recent market entrants Bullish and Circle increased by 11% and 16%, respectively. Inflows into Bitcoin and Ethereum exchange-traded funds added further support to the bullish trend.
Broader Economic Factors
Economic policy is also playing a role. CME FedWatch data show that markets are pricing in a high probability of another Federal Reserve rate cut at the next meeting. The Fed's previous rate cut in September was the first in four years and contributed to gains in both equities and crypto assets. A second cut could extend market optimism.
Despite ongoing uncertainty in Washington, the current environment points to continued strength for digital assets and related equities, reflecting broader trends in global finance.
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