Economy

Bitcoin’s Government Shutdown Rally: Can Crypto Outperform Amid Economic Uncertainty?

Bitcoin rose on shutdown, but 2018 saw a sell-off. Uncertainty boosts safe havens; gold hits record.

byAndres Castro

October 1, 2025, 5:43 PM

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Executive Summary

Bitcoin rallied to a two-week high following the onset of the US federal government shutdown, with traders anticipating the cryptocurrency may benefit from the resulting economic uncertainty.

The shutdown has led to federal agencies activating contingency measures, with President Trump’s administration having warned of potential mass layoffs, contributing to heightened risk aversion and a demand for safe-haven assets.

Despite a 9% drop during the 2018 shutdown, recent strong inflows into spot Bitcoin ETFs are reinforcing its reputation as an independent hedge, potentially favoring it over the next 30 days.

The Story So Far

The ongoing U.S. federal government shutdown is creating economic uncertainty and prompting a flight to safe-haven assets, with Bitcoin’s current market performance being evaluated against a mixed historical precedent where a 2018 shutdown saw a crypto sell-off amid broader market challenges and new regulatory scrutiny, but current strong inflows into Bitcoin ETFs and corporate demand now position it as an independent hedge that could potentially benefit from this period of instability.

Why This Matters

The federal government shutdown has initially propelled Bitcoin to a two-week high, reinforcing its emerging reputation as an independent hedge and potential safe-haven asset amidst economic uncertainty, evidenced by significant ETF inflows. However, this immediate boost is tempered by the 2018 shutdown, which saw Bitcoin sell off, suggesting that prolonged economic stagnation could still pose a risk despite its current decoupling from traditional markets, making its long-term trajectory during this period uncertain but watched for its role as a corporate reserve asset.

Who Thinks What?

Bitcoin traders and some analysts believe the cryptocurrency may benefit from the economic uncertainty caused by the government shutdown, viewing it as an independent hedge, as evidenced by its rally and significant ETF inflows.

Investors and other analysts remain cautious, recalling that a similar government shutdown in 2018 triggered a sell-off in the crypto market amid concerns about slower economic growth and potential stricter regulatory measures.

Bitcoin rallied to a two-week high on Wednesday following the onset of a United States federal government shutdown, with traders and data suggesting the cryptocurrency may benefit from the economic uncertainty. Despite this immediate boost, investors remain cautious, recalling that a similar shutdown in 2018 triggered a sell-off in the crypto market amid concerns about slower economic growth.

Government Shutdown Details and Market Reactions

With no resolution in place, federal agencies have been ordered to activate contingency measures, leading to hundreds of thousands of employees being forced to stay home. Attention now focuses on the duration of the shutdown, as another Senate vote is scheduled for Wednesday to address the impasse.

President Trump’s administration previously warned of potential mass layoffs if an agreement is not reached, a threat that has heightened caution and risk aversion among traders. This uncertainty has led to a decline in yields on US 10-year Treasurys, indicating a growing demand for safe-haven assets.

Gold also surged to a record $3,895 per ounce, further signaling strong demand for traditional hedges. While the US stock market showed little immediate reaction, pressure emerged from ADP data revealing 32,000 fewer private payrolls in September, with August figures revised to show a net loss of 3,000 jobs.

Historical Context: The 2018 Shutdown

During the US government shutdown in December 2018, Bitcoin experienced a 9% drop. The economic impact could manifest quickly this time as government spending slows significantly and the release of official economic data faces delays.

The 2018 shutdown saw Bitcoin prices fall from $3,900 to $3,550 over 35 days. However, the cryptocurrency was already facing broader challenges, having dropped 42% in the two weeks preceding November 25, 2018.

Some analysts attributed the sharp sell-off in 2018 to stricter regulatory measures. In October of that year, the Financial Action Task Force (FATF) updated its guidelines to encompass virtual asset activities, including cryptocurrency exchanges and certain wallet providers, potentially leading traders to anticipate heightened regulatory scrutiny.

Bitcoin’s Current Position as an Independent Hedge

Recent market movements, including $430 million in net inflows into spot Bitcoin exchange-traded funds (ETFs) on Tuesday, suggest a potential decoupling from traditional equities. This trend has reinforced Bitcoin’s reputation as an independent hedge.

These Bitcoin ETFs collectively manage nearly $147 billion in assets, compared to the $461 billion held by gold ETFs within the $26 trillion gold market. Current conditions suggest that the government shutdown could prove favorable for Bitcoin over the next 30 days, even as short-term economic weakness pressures traditional markets.

Sustained corporate demand for Bitcoin as a reserve asset is also anticipated to play a crucial role in supporting bullish momentum during a period of heightened economic uncertainty.