Bitcoin and Ethereum are stabilizing after recent volatility as investors wait to see how long the U.S. government shutdown lasts.
At the time of writing, Bitcoin was up at $112,127, after gaining about 1% over the past day. According to crypto price aggregator CoinGecko, Ethereum is currently trading at $4,094 after rising 3.6% over the past day. BTC is currently down less than 12% from its recently set all-time high above $126,000, while ETH is about 18% below its own record.
While the crypto market stabilized, macroeconomic factors pushed gold to new highs of over $4,200 per ounce.
“The market narrative is evolving from an interest rate-sensitive regime to a liquidity-driven regime,” Hui Wen Tu, business manager at QCP Capital, wrote in a note to Singapore-based crypto asset managers. “Central bank purchases, de-dollarization trends, and portfolio hedging by institutional investors are the key drivers driving gold prices, and their relevance extends far beyond traditional inflation hedging frameworks.”
In recent weeks, there has been a lot of talk about how Bitcoin will fare in “downgrade” trades, where investors use precious metals, stocks, and BTC to hedge against a decline in fiat currencies.
However, the analyst said that decryption This week saw a lull in the current situation, but the argument that BTC stands on par with gold and stocks as an inflation hedge remains intact.
The Bureau of Labor Statistics was supposed to release September consumer price index data today. This is one of the key reports used by the Federal Reserve to inform U.S. monetary policy. However, the US government has been closed for two full weeks since October 1st.
Users of Prediction Markets Owned by Myriad decryption Parent company Dastan quickly lost hope that the closure would end by today. On October 3, the market reversed, with the majority of users predicting the shutdown would extend beyond mid-October. So the market is now resolved.
The BLS announced last week that it would release the CPI report, albeit a week later than originally planned. The report is expected to arrive Friday morning, October 24, a few days before the next Federal Open Market Committee meeting.
This exception was created to prevent delays in processing benefits at the Social Security Administration. “No other releases will be rescheduled or produced until normal government services resume,” the BLS said.
If the government is still shut down when the FOMC reconvenes in two weeks, this will not be the first time the committee has had to decide on monetary policy with poor economic data. Two government shutdowns during President Bill Clinton’s term (5 days in November 1995 and 21 days from December to January 1996) coincided with two FOMC meetings.
At the time, Republicans in Congress had refused to raise the debt ceiling, and lawmakers were deadlocked.
“In the short term, the ongoing shutdown of much of the federal government poses downside risks to economic expansion, the impact of which depends on the currently uncertain duration of the shutdown and the potential instability in financial markets that may occur at some point,” then-Federal Reserve Chairman Alan Greenspan said at a press conference after the November 1995 FOMC meeting.
Historical data from the BLS shows that inflation at the time hovered between 2.5% and 3%. Inflation was last reported at 2.9% in September.
But so far, Fed Chairman Jerome Powell has expressed some hope that he will stick with the committee’s plan for another rate cut by the end of the year.
“Even without new data from the Bureau of Labor Statistics, which has been delayed due to the federal government shutdown, privately produced job market indicators…provide ample evidence that the job market is cooling,” Powell said Tuesday in a speech at the National Association for Business Economics (NABE) conference in Philadelphia.
Countless users responded that they were unsure whether the FOMC would cut rates exactly twice in 2025, after one rate cut had already been approved in September. As of Wednesday morning, 83% of users thought the Fed would not approve two rate cuts, bringing the day’s rate hike to 19%. But I don’t know if that’s because they think this is going to be a year of one rate cut or three rate cuts.
The CME FedWatch tool currently gives a 97% chance that the Fed will cut interest rates by 25 basis points this month, and a 94% chance that it will approve an additional 25 basis point cut in December.
