Bitcoin price forecast: $700B loss due to U.S. government shutdown
The current price of Bitcoin is approximately $102,000, marking a significant decrease of almost 20% from its peak in October. This decline comes as the U.S. government shutdown reaches its 35th day, matching the longest shutdown in history with $700 billion being withdrawn from financial markets through the Treasury General Account (TGA). This liquidity drain poses risks to crypto markets, with Bitcoin leading the downward trend.
The ongoing shutdown has disrupted vital federal services and impeded economic progress. The substantial cash outflow from the TGA has compelled banks and institutions to resort to survival strategies, resulting in a surge in the utilization of the Standard Repo Facility (SRF). This development has adversely affected riskier assets, including cryptocurrencies, by limiting capital inflows. Consequently, Bitcoin’s value has dropped from $126,500 to around $102,000, with an uptick in 24-hour trading volume, indicating increased volatility driven by external factors rather than genuine market confidence.
Moreover, the U.S. Dollar Index (DXY) has risen above 100 for the first time in months, compounding the downward pressure on Bitcoin. Historically, a robust dollar has a dampening effect on crypto and technology stocks. Despite initial optimism following the U.S. midterm elections, Congress has been unable to pass a series of temporary funding bills. The failure to reach an agreement has prolonged the shutdown, leading to heightened uncertainty and restricted liquidity access. The prevailing risk-off sentiment is expected to persist in the absence of a resolution.
Analysts suggest that this downturn is in line with Bitcoin’s historical price patterns. Typically, Bitcoin reaches a peak a year prior to its halving event, followed by a correction of 70-80% the subsequent year. The current trend appears to indicate the commencement of this correction phase, with the 2024 halving and forthcoming U.S. spot ETF launches influencing market dynamics. Although Bitcoin’s fundamentals remain robust, with a circulating supply close to its maximum limit and growing institutional interest, the current economic climate may lead to deviations from past cycles.
Despite the prevailing challenges, optimism has emerged with BlackRock’s announcement of the first Australian spot Bitcoin ETF. The ETF’s scheduled launch on the ASX in mid-November offers regulated exposure to Asia-Pacific investors, further complemented by Australia’s favorable crypto regulations and the ETF’s competitive fee structure. Similar product launches in other regions, including the U.S., Germany, and Switzerland, could establish a solid foundation for institutional demand in the future. As Bitcoin hovers around the $102,000 mark, the market awaits further developments amidst the ongoing government shutdown and evolving economic conditions.
