How Bitcoin Liquidity Has Been Affected by the Government Shutdown

Bitcoin has experienced a 19% drop from its all-time high, with declines attributed to a U.S. government shutdown that withdrew $700 billion from the markets. This liquidity crisis arose as the Treasury General Account (TGA) swelled to $1 trillion, removing cash from the private financial system, which is critical for lending and investment. Analysts from BitMEX predict a strong relief rally following the shutdown, as liquidity is expected to return, which could reinvigorate Bitcoin’s market. As the TGA’s increase has starved the financial system of necessary funds, Bitcoin is now trading around $102,600, down 10% in two weeks and 18% since early October. Historical data suggests that after a government shutdown, financial markets often see a surge of capital back into circulation, aligning with Bitcoin’s seasonal upturn at year-end. The underlying dynamics could indicate that Bitcoin's four-year cycle is not yet complete. Furthermore, rising usage of short-term funding tools by the Federal Reserve indicates that liquidity challenges persist for risk assets, including cryptocurrencies.

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