In a turbulent market session, major cryptocurrencies faced downward pressure during Thursday’s Asian trading hours, influenced significantly by rising concerns regarding a potential U.S. government shutdown. Currently, Ethereum (ETH) is trading around $4,012.01, reflecting a decline of over 3%, edging closer to the crucial $4,000 mark not seen since early August. Bitcoin (BTC) also experienced a dip, falling over 1% to below $112,000, while notable declines were noted across other prominent cryptocurrencies like XRP and Solana.
On the decentralized betting platform Polymarket, the probability of a government shutdown has reached alarming levels. Shares betting on a shutdown occurring by the end of the year have surged to 77%, the highest figure since the contract’s inception. This probability indicates a growing consensus among traders regarding the likelihood that the U.S. Office of Personnel Management will announce a shut down due to a lack of funding appropriations by December 31. Parallelly, the odds of a shutdown occurring by October 1 stand at 63%.
Reports suggest that the White House is bracing for potential large-scale job cuts should a shutdown take place. The Office of Management and Budget has reportedly circulated a memo instructing agencies to formulate plans for staff reductions and furloughs in anticipation of the financial shortfall. As funding is expected to run out by the end of September, Congress faces a critical deadline. To avert a shutdown, lawmakers must either endorse a short-term continuing resolution or enact a set of full-year funding bills. However, there is significant uncertainty regarding reaching the necessary bipartisan support to meet the stringent 60-vote threshold for approval.
The overall cryptocurrency market sentiment was muted, driven in part by these macroeconomic concerns. The CoinDesk 20 Index fell by 2% to settle at 3,940 points, mirroring the caution seen across the broader financial landscape. Market analysts noted that while futures tied to the S&P 500 and Nasdaq traded either flat or in positive territory, the risk-averse atmosphere among cryptocurrency investors remained palpable.
Adding to the unease, comments from San Francisco Federal Reserve President Mary Daly emphasized a cautious stance on future interest rate cuts. While expressing support for reducing rates further, Daly abstained from referencing a specific timeline, focusing instead on the importance of data reliance. Following the Fed’s recent 25 basis point rate cut on September 17—with indications of potential additional cuts by year’s end—market watchers remain on edge. Seven Federal Reserve officials, including the New York Fed’s John Williams, are scheduled to speak later, likely influencing market dynamics.
As traders await Friday’s Personal Consumption Expenditures (PCE) data, regarded as the Fed’s preferred inflation measure, analysts at QCP Capital have pointed out the possible implications for Bitcoin. If inflation pressures appear manageable, this could signal room for additional Fed rate cuts, potentially providing the liquidity needed for Bitcoin to break through anticipated resistance levels in the coming months.
