Bitcoin Price Falls Sharply Below $100k As US Shutdown Ends

Treasury yields, Federal Reserve policy, have put pressure on risk assets, including Bitcoin, during the government shutdown.

Summary

  • Bitcoin crashed below $100,000, despite positive news on the government shutdown
  • Counterintuitively, the increased confidence in the U.S. government hurt Bitcoin
  • Treasury yields and a dovish Federal Reserve undercut risk assets

The longest government shutdown in U.S. history is over, but the crypto markets are still in the red. Just hours after lawmakers finalized a short-term deal to end the government shutdown, Bitcoin fell to $98,962.06 at last check. The drop below the key psychological level of $100,000 might have puzzled some investors, revealing broader structural risks.

The shutdown was a major disruptive event for the U.S. economy, threatening essential services, while over 800,000 government employees faced delays in pay. For this reason, markets typically react positively to news of its end.

What is more, the end of the shutdown didn’t even fit the “buy the rumor, sell the news” pattern in which traders bid up an asset in anticipation of a positive development. Instead, BTC trended negatively after the lawmakers reached a deal on the shutdown.

The shutdown likely refocused investors on the ongoing macroeconomic headwinds facing risk assets, including Bitcoin. For one, the relative rise in confidence in the U.S. government led to a surge in Treasury yields.

For instance, 10-year Treasury yields rose by 29 basis points, reaching 4.106%. These higher yields have attracted capital away from risk assets, as safer returns became more attractive. On the other hand, the U.S. dollar continued to trend downward.

The effects of the shutdown also triggered a decline in the stock market, driven by a drop in tech stocks. The tech-heavy Nasdaq was hit the worst, losing 2.5%. At the same time, the S&P 500 was down 1.6%. while Dow Jones fell 1.40%.

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