What Happens to Bitcoin If the US Government Shuts Down?

In brief

• A potential government shutdown could delay Friday’s jobs report, which Bitcoin traders rely on to predict Federal Reserve rate cuts.
• Bitcoin has climbed above $114,000 but still trails 0.7% behind its price from two weeks ago amid shutdown uncertainty.
• Historical shutdowns show mixed results for Bitcoin - it gained 14% during the 2013 shutdown but fell 6% during the 2018-2019 closure.

Bitcoin traders counting on upcoming U.S. employment data to gauge whether the Federal Reserve will lower interest rates again might be waiting a while as the government nears a potential shutdown.

And how Bitcoin reacts to such an event remains uncertain, analysts say, potentially heightening near-term volatility. Past shutdowns have had differing affects on the price.

“Rate-cut expectations are supportive of risk assets, but bubble concerns and political risk amplify short-term volatility. For crypto, this creates both liquidity support and added downside uncertainty,” Bitunix analysts wrote in a note shared with Decrypt. “In the medium term, confirmed rate cuts improve liquidity and support risk assets. In the short term, however, bubble fears and shutdown risk heighten fragility, making sharp “drop-and-rebound” swings more likely.”

Unless Congress enacts a full appropriations bill or continuing resolution before midnight on Tuesday, federal funding will lapse and a partial government shutdown will occur for “non-essential” functions. The federal government’s fiscal year ends on September 30.

“This week’s big event might not actually happen, as payrolls Friday could be the first high profile victim of a potential government shutdown if Congress is unable to reach an agreement on a short-term funding resolution by midnight tomorrow night,” wrote Deutsche Bank Head of Macro and Thematic Research John Reid in a note shared with Decrypt. “Indeed, back in October 2013, the shutdown meant we didn’t get the September jobs report until the 22nd of the month.”

At the time of writing, Bitcoin has climbed above $114,000 after having gained 3.8% in the past day. That still leaves it trailing 0.7% behind the price it was two weeks ago, according to crypto price aggregator CoinGecko.

Economic statistics and data processing are not considered essential functions, meaning the Bureau of Labor Statistics would need to hold itsupcoming jobs report until government funding is restored. It’s not that the data wouldn’t come out eventually, but the delay could spike volatility. Investors know the Federal Reserve’s monetary policy decisions are heavily influenced by jobs and inflation data.

Nicolai Sondergaard, Research Analyst at Nansen told Decrypt a shutdown could spike short-term volatility in crypto markets.

“But I do wonder if it will be more than that, if investors at large assume that the ‘shutdown’ will be resolved quickly,” he added. “I also wouldn’t be surprised if the potential effect of a shutdown hit broader financial markets before it even happens, if at all.”

This wouldn’t be the first shutdown that crypto markets have weathered.

The October 2013 shutdown stretched for 16 days. From Oct. 1 through Oct. 17, Bitcoin’s price increased 14% from $132.04 to $151.34.

But Bitcoin gains during a shutdown isn’t the rule. The longest ever shutdown was Dec. 22, 2018 through Jan. 25, 2019. During that 35-day stretch, Bitcoin fell 6% from $3,802.22 to $3,575.85 by the time it ended.

Users on Myriad, a prediction market owned by Decrypt parent company Dastan, have grown increasingly dubious of the Federal Open Markets Committee delivering two rate changes in 2025. The doubters have grown to 75%, an uptick from 40% during the first week of September.

The doubters could include users who believe the Fed will change rates at both its remaining Federal Open Market Committee policy meetings this year and those who think the committee will wait until 2026 to consider more interest rate changes.

Julio Moreno, the head of research at Cryptoquant, said the 2013 and 2018-2019 shutdowns found Bitcoin in very different markets.

“The demand for Bitcoin was growing strongly as it entered the final stage of the bull cycle [in 2013],” he told Decrypt, adding that by the time a shutdown materialized in 2018, demand for BTC was contracting during a bear market.

Moreno added that Bitcoin is positioned now more like it was in 2013 than in 2018.

“Bitcoin demand is growing, as we enter Q4, which is typically a positive season in terms of price performance,” he said.

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