tl;dr
Cryptocurrencies plummeted as U.S. government shutdown fears dominated markets, with Bitcoin and Ethereum hitting multi-month lows. Polymarket betting surged on a 77% chance of a 2025 shutdown, while the White House warned of job cuts and Congress stalled on funding bills. Traders now await pivotal ...
**Crypto Markets Dive as U.S. Government Shutdown Fears Intensify**
Cryptocurrencies faced sharp declines on Thursday, with Ethereum (ETH) and Bitcoin (BTC) leading the charge lower, as fears of a U.S. government shutdown cast a shadow over risk assets. ETH fell over 3% in Asian trading, dipping near $4,000 for the first time since August 8, while BTC slipped below $112,000, trading at $111,674.46. Other major tokens, including XRP, SOL, and DOGE, also suffered losses, with SOL approaching a critical $200 threshold.
The turmoil stemmed from rising odds of a U.S. government shutdown, as traders on the decentralized betting platform Polymarket priced a 77% chance of a 2025 shutdown by December 31—its highest level since the contract’s launch. A separate contract tracking a shutdown by October 1 stood at 63%. The grim forecasts reflect growing anxiety over Congress’s stalled efforts to pass a funding bill, with the government reportedly set to exhaust its cash by late September.
The White House has warned of potential large-scale job cuts if a shutdown occurs, with the Office of Management and Budget urging agencies to prepare contingency plans. Lawmakers face a tight deadline: either pass a short-term "continuing resolution" to fund operations or risk a shutdown. However, partisan gridlock complicates matters, as securing the 60 Senate votes required for any measure remains uncertain.
Adding to the unease, San Francisco Fed President Mary Daly reiterated support for further rate cuts but avoided setting a timeline, emphasizing data dependence. The Federal Reserve’s recent 25-basis-point rate cut in September had already signaled a cautious approach, with policymakers like Chair Jerome Powell signaling reluctance to accelerate easing. Traders now await Friday’s PCE inflation data, the Fed’s preferred gauge, which could influence expectations for future rate cuts.
Analysts at QCP Capital noted that if inflation remains contained, the Fed might have room for additional cuts in Q4, potentially boosting liquidity for risk assets like crypto. “That could be the catalyst for BTC to attempt a long-anticipated breakout,” they wrote. Yet, for now, the market remains tethered to macroeconomic uncertainties, with government shutdown fears and monetary policy debates driving volatility.
As investors weigh these risks, the crypto space continues to mirror broader financial markets—sensitive to geopolitical and fiscal shifts. For now, the path forward for ETH, BTC, and their peers hinges on whether Washington can avert chaos or if the specter of a shutdown will keep portfolios on edge.