Bitcoin’s Price Rallies: A Breakdown of Recent Trends and Influencing Factors
Last week, Bitcoin’s price experienced a robust rally, climbing 12.14% and effectively reclaiming losses sustained during a rather uneventful September. In contrast to the previous months where altcoins were the primary catalysts for market movements, this surge was distinctly led by Bitcoin. Notably, major altcoins such as Ethereum (ETH) and Solana (SOL) followed suit, posting gains of 12.90% and 13.24%, respectively.
Bull’s Reasons: Shutdowns, Jobs, and the Fed
Several factors contributed to Bitcoin’s recent rally, with the most significant being the US government shutdown that commenced at midnight EST on Wednesday. During such shutdowns, federal employees cease work, and government budget utilization comes to a halt. This scenario instilled a sense of economic uncertainty among market participants, who speculated that it may prompt the Federal Reserve to lower interest rates in their upcoming Federal Open Market Committee (FOMC) meeting set for late October.
Before the shutdown, the probability of a rate cut was estimated at around 89% according to CME Group’s FedWatch Tool. However, following the announcement of the shutdown, that probability leaped to a remarkable 98%. Bitcoin was trading around the $112,000 mark when this news broke, setting the stage for a rapid price ascent.
Weak jobs data further fueled this bullish momentum. The ADP Employment Report for September revealed a contraction of 32,000 jobs, starkly contrasting with the forecasted gain of 50,000 jobs. This dismal figure suggests a downturn in the US labor market, adding to the speculation surrounding the Federal Reserve’s potential policy adjustments.
Furthermore, the Republican Party’s intention to lay off federal employees as a part of the shutdown adds another layer to this economic narrative. These cuts echo a previous attempt by the administration of President Donald Trump to reduce the federal workforce. If successful, these measures could significantly raise the current 4.3% unemployment rate, pressuring the Federal Reserve to consider more aggressive rate cuts.
Japanese Politics Also Plays a Role
Another critical influence came from Japan, where the Liberal Democratic Party elected Sanae Takaichi as its new president, likely positioning her to take the prime minister role. Takaichi is anticipated to adopt policies that will weaken the yen, contrasting with her predecessor, Fumio Kishida, who had been contemplating interest hikes to combat inflation. With expectations of monetary easing from Japan, Bitcoin’s price temporarily surged beyond $125,500 over the weekend, hinting at a new all-time high.
Current Market Dynamics
Overall, Bitcoin’s recent price movements are largely driven by traders reacting quickly to expected economic developments. Participants anticipate that global liquidity may ease, which can often bode well for asset prices. However, predicting how market sentiment may react if the government shutdown prolongs remains challenging.
A significant event to watch this week will be the US Treasury’s bond auctions scheduled for Monday and Tuesday. The Treasury is set to issue $249 billion in short-term bonds during these two days. Historically, such auctions tend to proceed despite government shutdowns, which could impose a liquidity restriction on the market in the absence of government spending. Bitcoin’s impressive 10% rise in just three days underscores the tensions that may arise amid a short-term liquidity crunch.
Eyes on Powell’s Thursday Speech
As the week unfolds, various macroeconomic indicators will come into play. On Monday, the Conference Board’s Employment Trends Index is set to be released, followed by the New York Fed’s Survey of Consumer Expectations on Tuesday. Wednesday holds more significance with the release of minutes from the September FOMC meeting alongside a US 10-year Treasury auction.
On Thursday, all eyes will be on Fed Chair Jerome Powell, who is expected to speak alongside a US 30-year Treasury auction. A series of other Fed officials are also scheduled to address the public. While these events may provide more context for market expectations regarding rate cuts, any unexpected government measures in response to the shutdown could introduce greater volatility to the market landscape.
Investors are undoubtedly bracing themselves for what could be a pivotal week, with many hoping for continued momentum from Bitcoin and the broader crypto market.
