In the face of a U.S. government shutdown, Bitcoin (BTC) and gold have made significant gains, signaling a shift in investor sentiment. As traditional economic indicators like employment reports are delayed, traders are increasingly turning to alternative assets. This week, Bitcoin surged to $120,000, marking a 9% increase, while gold climbed 2.9% to reach $3,900. The shutdown has resulted in over 90% of the SEC staff being furloughed and left the Commodity Futures Trading Commission (CFTC) operating with minimal personnel. The market has reacted positively, anticipating a likely 25 basis-point interest rate cut by the Federal Reserve later this month due to a surprising drop in U.S. private payrolls.
BTC and Gold Shine Amid Uncertainty
The delay in key economic data has spurred interest in Bitcoin and gold, as investors seek refuge from the existing market uncertainty. Bitcoin’s rally is partly attributed to historical trends, as October has traditionally been a bullish month for the cryptocurrency. Gadi Chait of Xapo Bank emphasized this point, noting Bitcoin’s consistent ability to overcome challenges and establish itself as a digital asset with enduring value.
On-chain data supports this optimistic outlook. According to CryptoQuant, Bitcoin demand has increased by approximately 62,000 BTC per month since July. This growth is largely driven by the rise of exchange-traded funds (ETFs) and significant purchases by large investors, or “whales.” For instance, ETF holdings saw a remarkable 71% increase in the fourth quarter of 2024.
The DeFi Sector’s Rising Influence
Meanwhile, the decentralized finance (DeFi) sector continues to expand, offering new opportunities for traders and investors. Eddie Zhang, President of dYdX Labs, pointed out that DeFi’s share of trading activity has been growing, particularly with renewed interest and participation from Asia. This growth reflects DeFi’s potential to fulfill its promise of revolutionizing the financial landscape, with an accelerating pace of market adoption.
Looking ahead, the crypto market is closely monitoring potential catalysts that could influence prices. These include decisions on ETFs for altcoins like Solana and XRP, which may be delayed due to the shutdown, and the upcoming Ethereum Fusaka upgrade.
Market Dynamics and Derivatives Positioning
The current market environment presents a mixed bag of opportunities and challenges. While Bitcoin’s price surge is encouraging, it has remained within a tight range, unlike previous spikes in volatility. This stability has created favorable conditions for altcoins, which often perform well when Bitcoin consolidates, as capital rotates into more speculative assets.
However, not all tokens have benefited from this market shift. MYX Finance (MYX) experienced a dramatic 43% decline, attributed to a rapid unwinding of leverage. Meanwhile, Plasma’s XPL token is facing challenges amid speculation that market makers may be shorting on behalf of the founding team, a claim that XPL’s founders have denied.
In the derivatives market, the BTC futures market remains strongly bullish, with open interest at all-time highs above $32 billion. However, there’s a notable divergence in funding rates, with Deribit showing an exceptionally high rate of 25% compared to more neutral rates on other exchanges. This suggests a concentration of aggressive long positions in specific areas.
Technical Analysis and Crypto Equities
Technical analysis reveals that Ether (ETH) has re-entered its weekly range after touching the 100-day exponential moving average (EMA) on the daily chart. Despite trading above key EMAs, it remains within a bearish daily order block, which could signal a potential pullback. Bulls will be watching for a break above this level to target range highs and potentially reach new all-time highs.
In the crypto equities space, companies like Coinbase Global (COIN) and Circle Internet (CRCL) have posted gains, reflecting the positive sentiment in the broader crypto market. Coinbase closed at $372.07, up 7.48%, and Circle Internet saw a 16.04% increase, closing at $149.72.
Looking Forward: Opportunities and Risks
As we move deeper into October, the crypto market is poised for potential growth, fueled by a combination of macroeconomic factors and crypto-specific developments. The anticipation of a Federal Reserve rate cut adds to the bullish sentiment, making risk assets like cryptocurrencies more attractive.
However, investors should remain cautious, as the market continues to navigate the complexities of a government shutdown and delayed economic data. The balance between opportunity and risk will be crucial for traders and investors looking to capitalize on the current market dynamics.
In summary, while Bitcoin and gold have captured the spotlight amid market uncertainty, the evolving landscape of DeFi and the broader crypto ecosystem offer promising avenues for growth. As always, staying informed and vigilant will be key to navigating the ever-changing world of digital assets.
Steve Gregory is a lawyer in the United States who specializes in licensing for cryptocurrency companies and products. Steve began his career as an attorney in 2015 but made the switch to working in cryptocurrency full time shortly after joining the original team at Gemini Trust Company, an early cryptocurrency exchange based in New York City. Steve then joined CEX.io and was able to launch their regulated US-based cryptocurrency. Steve then went on to become the CEO at currency.com when he ran for four years and was able to lead currency.com to being fully acquired in 2025.
