Bitcoin Rises as Crypto Traders Are Bullish on Government Shutdown

Bitcoin

and other cryptocurrencies were rising Friday as traders turned bullish on the prospect of a U.S. government shutdown which supports philosophical tenets of decentralized currencies but risks draining liquidity from wider markets.

The price of Bitcoin has risen 2% over the past 24 hours to above $27,000, with the largest digital asset moving out of the range around $26,000 that has dominated for more than a month.

“Despite large-scale equity weakness across most sectors … Bitcoin currently sits at a nine-day high, reclaiming an important push-and-pull level at $27,000,” said Luke Nolan, an analyst at digital asset investment group

CoinShares
.

Bitcoin has suffered from historically low volatility and trading volumes since the summer, a factor that would be a long-term disadvantage but likely has kept prices afloat amid a recent slide in the stock market. The

Dow Jones Industrial Average

and

S&P 500

are on track to end a brutal September, while Bitcoin is poised to beat history by rising in this month for the first time in seven years.

While the possibility of a U.S. government shutdown—which could happen this weekend—is hanging over equity markets, some crypto traders are seeing a bullish angle for Bitcoin.

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“Some participants view the possible government shutdown as bullish for cryptocurrencies, as it plays directly into the narrative of non-sovereign currencies not being affected by government procedure,” said Nolan. “The possible shutdown is a large-scale reflection of the periodic dysfunction of due process, which fits well into the philosophical narrative of crypto currencies.”

Indeed, a government shutdown could boost Bitcoin—but there are risks. When the U.S. flirted with whether or not to raise the debt ceiling in May, Bitcoin suffered, despite this situation apparently offering a similar opportunity for principle-based gains. That’s because a government shutdown, like the debt ceiling issue, risks draining liquidity from markets as investors broadly rotate into safer bets. Bitcoin could be an unexpected casualty amid a wider risk-off move.

Beyond Bitcoin,

Ether

—the second-largest crypto—gained 3% to $1,670. Smaller tokens or altcoins were also buoyant, with

Cardano

climbing 2% and

Polygon

popping 3%. Memecoins also advanced, with

Dogecoin

up 1% and

Shiba Inu

jumping 2%.

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Write to Jack Denton at jack.denton@barrons.com

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