Bitcoin and Ethereum have stabilized following recent volatility, as investors wait to see how long the U.S. government shutdown will drag on.
At the time of writing, Bitcoin has been changing hands for $112,127 after having gained about 1% in the past day. Ethereum is now trading for $4,094 after having picked up 3.6% in the past day, according to crypto price aggregator CoinGecko. BTC is now less than 12% off its recently set all-time high above $126,000, while ETH sits about 18% beneath its own record mark.
While crypto markets have stabilized, macroeconomic factors have pushed gold to new highs above $4,200 per ounce.
“The market narrative is evolving from a rate-sensitive to a liquidity-driven regime,” QCP Capital Business Manager Hui Wen Thoo wrote in a note for the Singapore-based crypto asset manager. “Central bank buying, de-dollarization flows, and institutional portfolio hedging have become the dominant forces propelling gold higher, extending its relevance well beyond the traditional inflation-hedge framework.”
In recent weeks, there has been talk of how Bitcoin fares in the “debasement” trade, which sees investors using precious metals, stocks, and BTC to hedge against weakening fiat currencies.
But analysts told Decrypt this week that current conditions have paused, but not reversed the argument that BTC has equal footing with gold and equities as an inflation hedge.
Today should have marked the release of September Consumer Price Index data from the Bureau of Labor Statistics. It’s one of the key reports used by the Federal Reserve to inform U.S. monetary policy. But the U.S. government has been shut down since October 1—for two full weeks.
Users on Myriad, a prediction market owned by Decrypt parent company Dastan, lost hope early on that the shutdown would end before today. On October 3, the market flipped and the majority of users predicted that the shutdown would drag on beyond mid-October. As such, the market has now been resolved.
The BLS put out a notice last week saying the CPI report would be released, albeit a week later than originally scheduled. The report will now arrive the morning of Friday, Oct. 24—a few days ahead of the next Federal Open Markets Committee meeting.
That’s an exception being made to prevent delays in the processing of Social Security Administration benefits. “No other releases will be rescheduled or produced until the resumption of regular government services,” the BLS said.
If the government is still shut down when the FOMC reconvenes in two weeks’ time, it won’t be the first time the committee has had to dictate monetary policy with scant economic data. The two government shutdowns during President Bill Clinton’s term, for 5 days in November 1995 and 21 days in December through January 1996, overlapped with two FOMC meetings.
At the time, congressional Republicans were refusing to raise the debt ceiling and left lawmakers in a stalemate.
“For the nearer term, the ongoing shutdown of much of the federal government presented a downside risk to the expansion whose effects would depend on the presently uncertain duration of the shutdown, and the potential unsettlement in financial markets that might develop at some point,” then-Federal Reserve Chairman Alan Greenspan said during a press conference after the November 1995 FOMC meeting.
At the time, inflation was running between 2.5% and 3%, according to historical BLS data. When inflation was last reported in September, it was 2.9%.
But so far, Federal Reserve Chairman Jerome Powell has offered some hope for sticking to the committee’s plans to enact another rate cut before the end of the year.
“Even without new Bureau of Labor Statistics data—delayed because of the federal government shutdown—privately produced measures of the jobs market … provide enough grounds to show the jobs market was cooling,” Powell said Tuesday during a speech at the National Association for Business Economics (NABE) conference in Philadelphia.
Myriad users reacted by signaling they’re less certain the FOMC will enact exactly two rate cuts in 2025, after one was already approved in September. As of Wednesday morning, 83% of users think the Fed will not approve two rate cuts, a hike of 19% in the past day. But there’s no telling whether that’s because they think it will be a 1- or 3-rate cut year.
The CME FedWatch Tool currently rates 97% odds the Fed will lower rates 25 basis points this month and a 94% chance it will approve another 25-basis point cut in December.
