The probability of a U.S. government shutdown has surged to 82%! Panic is spreading in the Bitcoin market, and investors are urgently seeking refuge.

The risk of a U.S. government shutdown has reached a historic high, with prediction markets indicating an 82% chance that necessary funding legislation will not pass before the October 1 deadline. As bipartisan negotiations stall, the crypto market has begun to experience significant fluctuations, with Bitcoin swinging dramatically between $108,780 and $113,700, leading investors to flock to stablecoins for safety. This article delves into the potential impacts of a government shutdown on the crypto market and strategies for investors to respond.

The risk of a U.S. government shutdown reaches a historic high

(Source: Polymarket)

According to prediction data from the Polymarket website, the probability of the U.S. government shutting down has skyrocketed to an astonishing 82%, setting a historical high. This figure reflects the severity of the political deadlock in Washington, with both parties seemingly unwilling to make concessions on the funding bill.

Key factors contributing to the current deadlock include:

President Trump canceled an important meeting with congressional leaders.

The two parties have completely different positions on key funding issues.

Both parties believe that maintaining their position gives them a political advantage.

Analysts point out that as the October 1 deadline approaches, the likelihood of reaching an agreement is rapidly diminishing. If the government does shut down, its duration could extend from a few days to several weeks, depending on when political pressure is enough to force lawmakers back to the negotiating table.

The government shutdown will have widespread effects

Once the U.S. government shuts down, its impact will ripple across multiple sectors:

Federal Employees: Hundreds of thousands of federal employees will face unpaid leave or be forced to work without pay.

Government services: Passport processing, visa applications, and other services will be delayed or suspended.

National Parks: Many national parks will close or reduce services.

Social programs: Supplemental Nutrition Assistance Program (SNAP) and healthcare funding may be affected.

Economic Data: The release of key economic reports will be delayed, increasing market uncertainty.

It is particularly noteworthy that the delay in the release of economic data will make it difficult for investors and analysts to assess market trends, which may lead to increased volatility in the financial markets.

The panic reaction of the crypto market

As the risk of government shutdown rises, the crypto market has begun to show significant hedging behavior.

· Main Crypto Assets Price Fluctuation Intensifies

The Bitcoin price has fluctuated significantly between $108,780 and $113,700 in the past 24 hours, reflecting the market's unease. Ethereum and other major crypto assets have also exhibited similar fluctuation patterns.

In contrast, meme coins and high-risk tokens have suffered more severe blows, with some tokens experiencing double-digit declines. This market behavior indicates that investors are shifting from high-risk assets to relatively safer options.

· Capital Flow Changes

Market data shows that major Crypto Assets ETFs are experiencing significant capital outflows, with investors turning to stablecoins and defensive assets:

1. The trading volume of stablecoins such as USDT and USDC has significantly increased.

2. Short-term lending products are favored by institutional investors.

3. Some investors are turning to physical assets like gold for hedging.

Crypto analyst Ash Crypto pointed out: "In the past, government shutdowns in the United States have led to market adjustments, which is why people feel panic. Uncertainty is the biggest enemy of the market, and government shutdowns bring exactly that kind of uncertainty."

· Regulatory Delays: A Double Blow to the Crypto Market

The government's shutdown will not only affect price fluctuations in the crypto market, but will also have a significant impact on the regulatory environment.

· SEC and CFTC activities may be paused

Key regulatory bodies such as the U.S. Securities and Exchange Commission ( SEC ) and the Commodity Futures Trading Commission ( CFTC ) may slow down or halt non-essential activities during the government shutdown, which means:

1. The decision on the new ETF application will be delayed.

2. Law enforcement actions may be suspended.

3. The release of policy guidelines for digital assets will be delayed.

This kind of regulatory uncertainty may further exacerbate market Fluctuation, especially for those projects and companies awaiting regulatory decisions.

The Impact of the Strong US Dollar on Bitcoin

During periods of global uncertainty, the US dollar is often seen as a safe-haven asset. The risk of government shutdown has led to a strengthening of the dollar, which has had a negative impact on crypto assets such as Bitcoin.

1. The strengthening of the US dollar reduces Bitcoin's appeal to international buyers.

2. Investors may be more inclined to hold cash rather than risk assets.

3. Overall market demand may weaken as a result.

Investor Response Strategy

In the face of government shutdown risks and market fluctuations, cryptocurrency investors may consider the following strategies:

· Short-term Strategy

Increase stablecoin allocation: Increase the holding ratio of stablecoins such as USDT and USDC during uncertain times.

Set stop-loss orders: Set reasonable stop-loss points for major crypto assets to limit potential losses.

Reduce leveraged trading: Lower or avoid the use of leverage during periods of high Fluctuation to reduce liquidation risk.

Focus on liquidity: Ensure that there are enough liquid assets in the portfolio to respond to emergencies.

· Long-term Strategy

Diversification: Not only diversify among crypto assets, but also consider other asset classes.

Focus on fundamentals: Political uncertainty is usually a short-term factor, and long-term investors should pay more attention to project fundamentals.

Regular Investment: Consider adopting a regular investment strategy to average costs through price fluctuations.

Be patient: history shows that government shutdowns are usually temporary, and the market will eventually return to fundamentals.

Historical Experience: The Impact of Past Government Shutdowns on the Market

Looking back at history, the impact of U.S. government shutdowns on financial markets is usually short-term. For example, during the 35-day government shutdown from 2018 to 2019, the S&P 500 index actually rose by about 10% during the shutdown.

However, the crypto assets market was relatively immature at that time, and institutional participation was far lower than today. Now, with a significant increase in the participation of institutional investors in the crypto market, the government shutdown may produce different market reactions.

Conclusion: Stay alert but do not panic

The high probability of a government shutdown in the United States has indeed brought additional uncertainty and Fluctuation to the crypto market. However, experience shows that such political events usually do not have long-term structural effects on the market.

For Crypto Assets investors, the key is to stay vigilant but not panic. Short-term Fluctuations may provide buying opportunities for long-term investors, while overreacting can lead to unnecessary losses.

As the deadline of October 1 approaches, all eyes are on Washington. Whatever the outcome, the crypto market will adapt and move forward, just as it has done in the past when facing various challenges.