NOIDA (CoinChapter.com) — Inherently decentralized yet sensitive to regulatory and macroeconomic stimuli, Bitcoin and altcoins brace for potential turbulence from the potential US government shutdown.
The US government passed a stopgap bill in January earlier this year, which funds the federal government into early March 2024. Congressional leaders gathered at the White House on Feb. 27 to negotiate some progress on the spending bills.
However, the Senate and the House of Representatives, particularly due to the influence of conservative hardliners in the latter, showed signs of discord, complicating the passage of necessary legislation.
The Impact Of US Government Shutdown on Bitcoin and Altcoins
The immediate concern for the crypto market revolves around the uncertainty a shutdown instigates. Historical precedents suggest that Bitcoin and its digital counterparts exhibit resilience in governmental gridlock.
Yet, the threat of a shutdown carries a nuanced risk, especially concerning regulatory actions and legal proceedings integral to the market’s maturation.
Analysts have posited divergent trajectories for Bitcoin’s price, with some warning of bearish trends reminiscent of past downturns, while others see a potential for rebound and growth, underscoring the market’s speculative nature.
Altcoins, tethered to Bitcoin’s market sentiment yet influenced by their idiosyncratic factors, face a similar fate of volatility and speculative bets.
History indicates that BTC has been more or less resilient to government shutdowns. Since its birth, the US government has shut down thrice in 2013, 2018, and 2019. During the 2013 US government shutdown, Bitcoin price rallied nearly 40% in two weeks.
However, very short shutdowns, like the one in early 2018, had little impact on Bitcoin. Yet, the altcoin market cap dropped sharply during the period. During the Dec. 21, 2018–Jan. 25, 2019 US government shutdown, BTC and altcoins underwent a period of consolidation.
During the ongoing uncertainty over the US government shutdown, Bitcoin price has rallied above $59,000 for the first time since Nov. 2021. Yet, overbought risks could threaten the rally, while a sharp downturn could result in a long squeeze.
Navigating the Shutdown
As the deadline for averting the shutdown nears, all eyes are on Capitol Hill, where the negotiations—or lack thereof—will determine the immediate future of federal operations.
The SEC, pivotal for crypto’s regulatory oversight, has prepared for a “skeletal staff” operation, prioritizing investor protection and market integrity amidst budgetary constraints.
The continuity is crucial for the ongoing lawsuits and ETF applications, which the crypto community eagerly awaits. However, the general expectation is that the SEC’s vital functions will proceed, albeit at a possibly decelerated pace.
The broader implications for the US plans to tackle the impending shutdown hinge on legislative agility and bipartisan cooperation. However, the current political climate makes cooperation seem a far-fetched theory.
Meanwhile, traditional financial markets are reacting negatively to the news, with the Dow Jones Industrial Average dropping nearly 100 points on Feb. 27.
