In a recent forecast, Standard Chartered has indicated that Bitcoin could be on the verge of breaking its all-time high, potentially reaching $135,000 in the near future. This optimistic outlook is largely attributed to the ongoing US government shutdown, which is creating favorable conditions for a significant price rally in the cryptocurrency market.
Geoffrey Kendrick, the head of digital assets strategy at the UK bank, stated in an investor note that Bitcoin’s price action suggests it may soon surpass its previous record, which is currently around $124,000. As of now, Bitcoin is trading at approximately $120,500, having experienced a 10% increase over the past week, and is just 3% shy of its all-time high.
The government shutdown, which marks the 22nd occurrence since 1974, has stemmed from lawmakers’ inability to reach an agreement on the national budget. Kendrick noted that the current situation holds particular significance compared to previous shutdowns, as it reflects Bitcoin’s evolving status as a hedge against governmental uncertainties. He compared this situation to the shutdown during Donald Trump’s presidency between December 2018 and January 2019, which had minimal impact on Bitcoin prices. In contrast, today’s market dynamics show a close relationship between Bitcoin and US government risk metrics.
The ongoing shutdown is also causing delays in critical economic data releases that the Federal Reserve uses for its policy decisions. Agencies like the Bureau of Labor Statistics and the Bureau of Economic Analysis have halted data collection, which affects reports on jobs and inflation that are essential for economic assessments. Market analysts have noted that this uncertainty regarding official data might positively influence the Fed’s policy, leading to expectations of interest rate cuts.
Amidst this backdrop, private employment indicators, including the ADP report, are suggesting stagnant job creation levels. Analysts David Duong and Colin Basco from Coinbase pointed out that the combination of uncertain data due to the shutdown and a slowdown in hiring fosters optimism for looser monetary policy by the Federal Reserve. Currently, futures markets are indicating an 87% probability of two rate cuts, likely reducing the target interest range to 3.50-3.75% by December, down from the current rate of 4%.
Moreover, a weakening US dollar and surging gold prices are indicative of easing real-rate expectations, which typically benefit Bitcoin and other risk assets. Analysts have emphasized that these conditions could loosen financial constraints for the US dollar, ultimately favoring cryptocurrencies.
However, the implications of the government shutdown are not entirely favorable for the cryptocurrency sector. October was anticipated to be a pivotal month for altcoin exchange-traded funds (ETFs), with several applications pending approval from the Securities and Exchange Commission (SEC). The shutdown threatens to disrupt the SEC’s review process for these altcoin ETFs, which investors had been eagerly awaiting.
Nate Geraci, co-founder of the ETF Institute, remarked that a prolonged government shutdown may hinder the launch of new spot crypto ETFs, potentially delaying what many had hoped would be an exciting period for altcoin investment.
As the situation unfolds, all eyes are on Bitcoin and its response to ongoing political turmoil and economic data uncertainty, which could redefine its position in the financial landscape.
