Bitcoin Experiences Decline Amid Government Shutdown
Analysts have noted that Bitcoin appeared to be approaching the tail end of a protracted bull market even before a U.S. government shutdown hastened its decline.
They observed that an increase in the government’s Treasury General Account (TGA) is draining critical capital from various asset markets, including cryptocurrencies.
According to BitMEX analysts, the shutdown has swollen the Treasury’s TGA to $1 trillion, siphoning around $700 billion from the marketplace, driving the usage of the overnight repurchase facility (SRF) to unprecedented levels, and depleting capital from risk assets.
Currently, Bitcoin is trading at approximately $102,600, experiencing a 3.3% drop in the last 24 hours. Over the past two weeks, it has fallen more than 10% and is down 18% since reaching an all-time high earlier in October.
During such governmental shutdowns, federal agencies often significantly slow or completely halt discretionary spending. Nevertheless, the TGA maintains its operations by issuing government bonds and collecting tax revenues.
The cash in the TGA reflects funds that have exited the private financial system—no longer held in banks, not available for lending, and absent from money market funds—leading to a liquidity crisis.
The Standard Repo Facility serves as a tool for the Federal Reserve to regulate short-term funding and stabilize short-term money markets. Analysts indicate that increased SRF usage typically suggests that banks and financial institutions may be facing funding shortages.
BitMEX analysts express optimism that the current U.S. government shutdown will conclude soon. Although there’s a record of 35 days, only a single day remains. Should it end, analysts believe the TGA will begin spending again, injecting substantial liquidity into the market.
They anticipate that this sudden influx of liquidity could lead to a pronounced rebound, in line with Bitcoin’s historical tendency for year-end strength.
Additionally, they suggest that this current turbulence serves as evidence that Bitcoin’s latest four-year cycle has not yet come to an end. Some analysts believe the predicted end of this cycle results from a combination of Bitcoin’s natural market rhythm and broader liquidity challenges.
They also mention that recent profit-taking by long-term holders suggests that the bull market could be nearing its conclusion, indicating a possible shift in momentum.
