Bitcoin has once again taken center stage in the financial world, smashing through the $126,000 mark on Monday, a significant milestone that reflects a complex interplay of factors currently shaping the cryptocurrency market. This surge comes amid a backdrop of U.S. government shutdown concerns, a softer dollar, and burgeoning ETF inflows, all of which have tightened supply and fueled a robust rally.
Bitcoin’s Meteoric Rise
As it stands, Bitcoin is trading near $124,000, building on an impressive 15% weekly gain that has lifted other major cryptocurrencies in its wake. Notably, Bitcoin has also set records in euro and Swiss franc terms, exceeding EUR 106,000 and CHF 99,600, respectively. Japan, too, has witnessed Bitcoin’s ascent, driven by the new prime minister’s nod towards Abenomics-style easing—a move that suggests a potentially more liquid market environment on the horizon.
The broader crypto market has responded enthusiastically to Bitcoin’s lead. Ethereum, for instance, surged by 4% to reach $4,700, its highest in three weeks. Traders are eyeing the $4,800–$5,000 range, optimistic that the momentum will hold. Binance Coin (BNB) stands out as an exceptional performer, having climbed over 20% in the past week and setting new records above $1,240. This highlights a strategic rotation into ecosystem names, capitalizing on the uptrend in the base asset.
Ripple Effects Across the Market
The ripple effect of Bitcoin’s rally is visible across the market. Dogecoin has gained 6%, trading at $0.26, while XRP has ticked higher to nearly $3. Solana has seen a significant boost, adding over 12% in the past seven days. The total cryptocurrency market capitalization briefly touched $4.27 trillion before settling at $4.24 trillion. This broad-based rally is underpinned by a sentiment index of 71, indicating greed but stopping short of the euphoria that typically precedes a market correction. This leaves room for further gains without immediate concerns of a blow-off top.
ETF-Driven Momentum
Bitcoin’s ascent to record highs has not been driven by leverage. Instead, the rally has been fueled by robust spot ETF inflows, which crossed $3.2 billion in the past week—marking the highest weekly inflow since November 2024 and the second-largest on record. Total allocations since January have now surpassed $60 billion, according to SoSoValue data.
Analysts are taking note of this ETF-driven demand. Ryan Lee, chief analyst at Bitget, emphasized that Bitcoin’s climb above $124,000 underscores deepening institutional conviction and a maturing market narrative. However, caution remains as FxPro’s Alex Kuptsikevich points out that long-term holders have been active sellers around these levels since July, indicating that supply is lurking if demand weakens.
In line with this, Bitcoin’s exchange balances have fallen to a six-year low of 2.83 million BTC, with 170,000 coins withdrawn in the past month, signaling a shift towards long-term storage. This dynamic of steady ETF buying and diminishing supply appears to be a key driver behind the current price movement.
Political Uncertainty and Market Dynamics
The ongoing U.S. government shutdown, now entering its second week, has stalled critical economic releases and created an air of uncertainty regarding fiscal policy. Historically, such political gridlock has prompted investors to shift capital towards hard assets like gold and Bitcoin, reflecting apprehensions about political stability and its impact on fiat currencies and equity markets.
In a historical context, Bitcoin nearly doubled in value during the October 2013 shutdown, while gold rose by more than 3%. Conversely, the 2018–19 shutdown saw Bitcoin decline by about 10% over five weeks, with gold remaining largely unchanged. The current record highs suggest that the market is leaning towards the 2013 pattern, with investors seeking refuge in Bitcoin amid fiscal uncertainty.
Simultaneously, a softer dollar has reduced headwinds for dollar-denominated assets, and bond markets are signaling expectations of a more cautious Federal Reserve stance. Traders anticipate that weaker economic data coupled with fiscal paralysis may lead policymakers to adopt a more dovish approach on interest rates, or at least refrain from further tightening.
For Bitcoin, this translates to expectations of easier liquidity conditions ahead, an environment that has historically coincided with major upward trends in the cryptocurrency market. As a neutral observer, the $125,000 mark seems to act as both a magnet and a critical battleground in the current market landscape.
As Bitcoin continues to capture headlines and investor attention, the question remains: will this rally have the staying power to redefine the market, or is it a precursor to new volatility? Only time will tell.
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.
