What will happen to Bitcoin if the US government shuts down?

A government shutdown or a delay in the release of non-farm payroll data could intensify cryptocurrency volatility this week.

Written by: Stacy Jones

Translated by: Chopper, Foresight News

TL;TR

• If the U.S. government faces a shutdown, the non-farm payroll report scheduled for release on Friday may be delayed. This data is a key basis for bitcoin traders to predict whether the Federal Reserve will cut interest rates.
• Bitcoin prices have surpassed $114,000, but due to uncertainty surrounding the shutdown, they remain 0.7% lower than two weeks ago.
• Historical data shows that the impact of government shutdowns on bitcoin is mixed: during the 2013 shutdown, bitcoin rose 14%, while during the 2018-2019 shutdown, it fell 6%.

Bitcoin traders had hoped to use the upcoming U.S. employment data to determine whether the Federal Reserve would cut rates again. But with the U.S. government on the brink of a shutdown, they may have to wait some time to get this crucial data.

Analysts say there is still uncertainty about how bitcoin will react to a government shutdown, which could increase short-term market volatility. During the last two government shutdowns, bitcoin's price performance was completely different.

“Expectations of rate cuts support risk assets, but bubble concerns and political risks amplify short-term volatility. For cryptocurrencies, this brings both liquidity support and increased downside uncertainty,” Bitunix analysts wrote in a report sent to Decrypt. “In the medium term, confirmation of rate cuts will improve liquidity and thus support risk assets; but in the short term, bubble panic and shutdown risks will increase market fragility, making sharp drops followed by rebounds more likely.”

If the U.S. Congress fails to pass a full appropriations bill or a temporary spending bill by midnight on Tuesday, federal government funding will be interrupted and “non-essential” government functions will partially shut down. The U.S. federal government's fiscal year ends on September 30.

“The main event this week (the non-farm payroll report) may not take place as scheduled. If Congress fails to reach a consensus on a short-term spending bill by midnight tomorrow, Friday's non-farm payroll data could become the first high-profile casualty of the government shutdown,” John Reid, Head of Macro and Thematic Research at Deutsche Bank, wrote in a report sent to Decrypt. “In fact, during the government shutdown in October 2013, the September employment report was not released until the 22nd of that month.”

At the time of writing, bitcoin has risen 3.8% in the past 24 hours, with the price breaking through $114,000. But according to cryptocurrency price aggregator CoinGecko, this price is still 0.7% lower than two weeks ago.

Economic statistics and data processing are not considered “essential government functions,” which means the U.S. Bureau of Labor Statistics will have to suspend the release of the upcoming employment report until government funding is restored. The data will not go unpublished, but its delay could trigger market volatility. Investors are well aware that the Federal Reserve's monetary policy decisions are heavily influenced by employment and inflation data.

Nansen research analyst Nicolai Sondergaard told Decrypt that a government shutdown could intensify short-term volatility in the crypto market.

“But I'm not sure the impact will be greater. If most investors believe the shutdown issue can be resolved quickly, the situation could be different,” he added. “Also, even if there is an impact, the potential effects of the shutdown may have already hit the overall financial market before it actually happens, and I wouldn't be surprised by that.”

The crypto market is not experiencing a government shutdown for the first time.

The government shutdown in October 2013 lasted 16 days. From October 1 to October 17, bitcoin's price rose 14% from $132.04 to $151.34.

But “bitcoin must rise during a shutdown” is not a rule. The longest government shutdown in U.S. history occurred from December 22, 2018, to January 25, 2019, lasting 35 days. During this period, bitcoin's price fell 6% from $3,802.22 to $3,575.85 by the end of the shutdown.

On Myriad, the prediction market under Decrypt's parent company Dastan, users' skepticism about “the Federal Open Market Committee (FOMC) making two rate adjustments in 2025” is growing. The proportion of skeptical users has risen to 75%, far higher than the 40% in the first week of September.

Among these skeptics, some believe the Federal Reserve will adjust rates at both remaining FOMC policy meetings this year, while others think the Fed will wait until 2026 to consider further rate adjustments.

Cryptoquant Head of Research Julio Moreno said that the market environment for bitcoin during the 2013 and 2018-2019 government shutdowns was completely different. “During the 2013 government shutdown, bitcoin was in the final stage of a bull market cycle with strong demand growth,” he explained to Decrypt. “By the time the 2018 shutdown occurred, bitcoin was in a bear market with shrinking demand.”

Moreno added that bitcoin's current market positioning is closer to 2013 than to 2018.

“With the arrival of the fourth quarter, demand for bitcoin is growing. Historically, the fourth quarter is usually a strong quarter for bitcoin price performance,” he said.