US Government Shutdown Risks Impacting Crypto Market

The cryptocurrency market has recently suffered a sharp decline amid the negative atmosphere created by the growing possibility of a government shutdown in the US. During Asian trading hours, Ethereum (ETH) fell more than 3% to $4,013 and tested the $4,000 mark. A similar decline was seen for Bitcoin (BTC), with the coin losing over 1% to fall below $112,000. Among other major crypto assets, XRP, Solana (SOL) and Dogecoin (DOGE) also lost between 2.6% and 3%. In particular, Solana is expected to fall below the $200 level.

The risk of a US shutdown is causing serious anxiety among investors. If the government is unable to find the necessary funds by the end of September, a possible shutdown could ensue. According to Polymarket, investors rate the probability of a shutdown by the end of the year at 77%. By October 1, the probability of a shutdown is 63%. It was also reported that the White House is preparing for large-scale layoffs due to the budget dispute. The Office of Management and Budget sent a directive to federal agencies asking them to prepare plans for staff reductions and mandatory unpaid leave in case the spending bill is not approved.

Crypto market jitters are not limited to the risk of a government shutdown. In recent statements, the President of the Federal Reserve Bank of San Francisco, Mary Daly, supported interest rate cuts but refrained from giving a precise timetable. The Federal Reserve cut its policy rate by 25 basis points on September 17 and signaled that there could be two more cuts by the end of the year. However, Daly's statements reveal that uncertainty remains in the process. This uncertainty, in turn, is delaying the liquidity flows needed for Bitcoin's long-awaited bullish attempt.