Important takeouts:
-
The US Treasury yields fell over the decade, highlighting increased risk aversion and demand for safe inventory assets.
-
The Spot Bitcoin ETF faced an influx of $430 million, but the stock remained muted, indicating a potential separation from the traditional market.
Bitcoin (BTC) hit a two-week high on Wednesday following the US federal government closure. But investors remained cautious and remember that the 2018 shutdown caused the sale amid concerns of slow economic growth.
Without a solution, federal agencies were ordered to activate emergency response measures, forcing hundreds of thousands of employees to stay home. Now attention is focused on the length of the closure, with another Senate vote scheduled for Wednesday.
The Trump administration has warned that if a deal is not reached, it could pursue a massive layoff. This is a threat that makes traders more cautious and risk-averse.
The US 10-year Treasury yield fell on Wednesday, indicating that traders are willing to accept low returns in exchange for the security of government-supported debt. Gold also surged to a record of $3,895 per ounce, indicating stronger demand for traditional hedges.
At first glance, the shutdown seemed to provide a short-term boost to Bitcoin, but questions remain about its durability. The US stock market had little immediate response, but in September there was pressure from ADP data, which had a low private pay of 32,000, but the numbers for August were revised to show net losses for 3,000 jobs.
Bitcoin lost 9% during US government closures in 2018
When the US government closed in December 2018, Bitcoin fell 9%. This time, government spending is slower and official data is delayed, which could lead to rapid economic drag.
The US stock market began a 12% revision 10 days before the government shut down on December 22, 2018, but the full decline was reversed less than a month later. Investors who retained their position and saw past their short-term volatility ultimately came out first.
However, for Bitcoin, the December 2018 shutdown had a slightly negative effect, dropping the price from $3,900 to $3,550 during the 35-day standoff. Still, cryptocurrencies had already fallen 42% at the time in the two weeks ended November 25th, 2018. Some analysts argued that strict regulatory measures were the trigger for a sudden sale.
In October 2018, the Financial Action Task Force (FATF) updated guidelines to cover virtual asset activities, including cryptocurrency exchanges and specific wallet providers. Intergovernmental agencies representing approximately 200 jurisdictions focus on their missions in money laundering and counter-terrorism financing. Traders may expect to see a greater scrutiny of regulations.
Related: The US Senate holds crypto tax hearings as the IRS provides corporate tax relief
A net inflow of $430 million on Tuesday, combined with a recent decoupling from the stocks, became a spot Bitcoin ETF to Bitcoin ETF, strengthening its reputation as an independent hedge. Currently, these vehicles manage nearly $147 billion in assets, while Gold, a $26 trillion market, supports $461 billion through ETFs.
Current terms suggest that government closures will prove to be beneficial for Bitcoin over the next 30 days, even if pressure on traditional markets with pressures of short-term economic weakness. The sustained corporate demand for Bitcoin as a reserve asset is set to play a key role in supporting bullish momentum during increasing uncertainty.
This article is for general informational purposes and is not intended to be considered legal or investment advice, and should not be done. The views, thoughts and opinions expressed here are the authors alone and do not necessarily reflect or express Cointregraph’s views and opinions.