BTC Exposed As Shutdown Threatens Key Labor Data

As the fourth quarter begins, the specter of a shutdown in the United States worries the markets. If Congress fails to vote a budget extension by this Tuesday at midnight, a large part of the federal administration will stop. This scenario would also disrupt the release of the employment report, a key indicator for anticipating the Fed’s decisions. In such a fragile context, the crypto market, especially bitcoin, finds itself on the front line facing a new period of uncertainty.

An embargoed employment report

The US employment report, expected this Friday, is the focus of market attention, but it could simply not be published due to the shutdown that threatens Washington, in a context of dollar decline and gold surge.

“The major event of this week might simply not take place: the employment report this Friday would be the first major casualty of a possible government shutdown if Congress fails to adopt a temporary funding resolution by tomorrow night, midnight”, writes John Reid, head of macroeconomic research at Deutsche Bank.

This report, issued by the Bureau of Labor Statistics (BLS), is a key indicator for the Fed in its interest rate decision-making. Its possible suspension would place markets in a strategic gray area without immediate guidance.

The non-essential nature of statistical functions within the US administration means that the BLS will have to suspend publishing reports until further notice. This suspension does not mean loss of data but a delay that could be enough to destabilize financial and crypto markets.

In the absence of clear signals, analysts anticipate rising volatility in bitcoin and risk assets. Bitunix also highlights that “expectations of rate cuts support risky assets, but bubble fears and political risks amplify short-term volatility.”

According to them, this situation increases market fragility, feeding “movements marked by drops followed by rebounds.” Specifically, if the shutdown blocks the release of the employment report, immediate consequences would include :

• A vacuum of information on the health of the US labor market, a central element for Fed policy ;

• Total uncertainty on interest rate expectations while the market counts on monetary easing ;

• Increased pressure on bitcoin, an asset very sensitive to macroeconomic announcements, especially in speculative periods.

The precedent of the shutdowns

Beyond the current urgency, this is not the first time bitcoin faces a federal shutdown in the United States. Past shutdowns reveal contrasting dynamics, closely linked to the ongoing market cycle.

In October 2013, a 16-day shutdown coincided with a 14 % surge in BTC, which rose from $132.04 to $151.34. Conversely, during the longest shutdown in history, 35 days between December 2018 and January 2019, bitcoin fell 6 %, from $3,802.22 to $3,575.85.

“Demand for Bitcoin increased strongly approaching the final phase of the bull cycle in 2013,” recalls Julio Moreno, head of research at CryptoQuant. He notes that in 2018, the situation was quite different, with demand “declining during a bear market.”

Today, the analyst believes the context is closer to that of 2013 than 2018. “Demand for bitcoin is rising entering the fourth quarter, a period generally favorable in terms of price performance,” he suggests.

In this context, bitcoin’s trajectory depends on the outcome of the budget standoff in the United States as well as the evolution of the Fed’s monetary policy. If demand for BTC continues to grow and the last quarter of the year proves supportive as usual, a new bullish phase remains possible.