- The price of Bitcoin (BTC) could see a potential rally
- The US Government is headed for an economic shutdown
- The Republican-controlled House of Representatives is divided over the issue
YEREVAN (CoinChapter.com) — The United States faces another government shutdown and debt ceiling impasse. Amid the growing uncertainty and panic, cryptocurrency enthusiasts and investors are closely watching Bitcoin’s price performance.
Bitcoin (BTC), the leader of the cryptocurrency market, has historically reacted during times of economic uncertainty. Particularly during the US Government shutdown, BTC has reacted favorably, with its price jumping a few percentage points. But will this round of political brinkmanship lead to a Bitcoin price boom?
What is a Government shutdown and why does it happen?
A US government shutdown refers to the temporary closure of federal government agencies, departments, and services. This happens due to the failure of Congress to pass appropriations bills that fund government operations.
A Government shutdown can occur when there is a budgetary impasse or disagreement between Congress and the President over government spending priorities. Government shutdowns are often the result of political disputes and can disrupt various government functions and services.
Currently, the US is just two days away from a Government Shutdown. In the United States, the fiscal year begins on Oct. 1st and ends on Sep. 30th of the following year.
However, before each fiscal year begins, Congress must pass a series of appropriations bills to fund government agencies and programs. These bills are necessary for the Government to allocate funds for various government functions, such as defense, healthcare, education, and infrastructure.
To avoid government shutdowns, Congress can pass temporary funding measures known as “continuing resolutions” (CRs). Also called “omnibus bills”, they keep government operations running at current spending levels until a budget agreement is reached.
Republicans hold Kevin McCarthy to Ransome
Unfortunately, the Republican Party, which holds a majority in the US House of Representatives, is divided. Speaker Kevin McCarthy has once again found himself in a tight spot.
A group of his party lawmakers is refusing to back his budget proposals and CRs. They demand that McCarthy include their proposals before tabling these measures for a vote.
Some of these demands are quite radical. Many are calling for tangible spending cuts in the new fiscal year. Some have even demanded the US stop funding Ukraine.
Speaker McCarthy is between a rock and a hard place. He must pass a bill to avoid a shutdown, but he cannot ignore the dissidents either. He holds only a thin majority in the house. Because of this, he cannot lose more than 4 votes to pass a short-term spending bill.
The holdouts, most of them members of the “Freedom Caucus”, are more than that. McCarthy knows he can’t take them lightly. In January this year, he had to endure through 15 rounds of voting before getting elected as Speaker. On his way to the goal, he made several concessions to this group, who wouldn’t otherwise budge.
Meanwhile, Florida Republican Congressman Matt Gaetz has gone as far as to demand the Speaker’s resignation. If the Government shuts down, it could cost McCarthy his job.
Bitcoin’s Performance During Past Shutdowns
The Government Shutdown can have a potential impact on Bitcoin’s price. To see this, it is crucial to examine its past behavior under similar situations.
During previous government shutdowns, Bitcoin has displayed a mixed bag of reactions.
For instance, during the 2013 shutdown between October 1-17, the price of BTC showed visible improvement. It gained over 80% in a massive rally.
In the beginning days of October 2013, the BTC price was around $133. After tanking around 15%, BTC regained its footing, with its price spiking to 2014 on October 24, 2013.
However, during the 2018-2019 government shutdown, Bitcoin’s price experienced relatively modest gains, suggesting that it wasn’t yet widely considered a safe-haven asset.
On Dec. 18, 2018, two days before the shutdown, BTC traded at $3,207. The shutdown propelled it on an over 30% rally. By Dec. 24, its price had reached $4,244.
The rally also saw short-term investors cashing out on their profits, sending BTC prices into a period of volatility.
Meanwhile, it’s important to note that Bitcoin’s volatility can be cut both ways. While it can surge during times of crisis, it can also experience sharp declines.
As the US grapples with these challenges, investors will monitor Bitcoin’s behavior in response to the evolving economic landscape. Whether it experiences a notable price boom remains uncertain. However, its role as a potential safe-haven asset during times of economic uncertainty continues to draw interest and speculation from investors worldwide.
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