If Trump increases his efforts to address the U.S. government shutdown, it may have a short-term negative impact on the crypto market by exacerbating market volatility, delaying regulatory progress, and undermining investor confidence. However, in the long term, it may attract safe-haven funds due to the decentralized asset properties, with the specific impact depending on the duration of the shutdown and the degree of policy interference. Below is a detailed analysis of this issue by Brother Li:
1. The direct impact of the government shutdown on the crypto market
Key regulatory bills delayed: The government shutdown may force the postponement of the review process for key cryptocurrency-related bills, such as the 'Digital Asset Market Structure Bill,' currently under review by the Senate Banking Committee. The delay of these bills means that the crypto industry will continue to face challenges in a regulatory gray area, forcing businesses and market participants to operate in uncertainty.
Reduction of financial regulatory agencies' functions: During the government shutdown, regulatory bodies such as the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) will be forced to significantly reduce their personnel, retaining only the most basic operations. This will lead to delays in the review of new ETF applications, suspension of approvals for changes to exchange rules, postponement of the release of guidance documents, and enforcement actions limited to the most critical matters.
Delay in the release of economic data: The government shutdown may also force delays in the release of important economic data such as employment and inflation. These data are crucial bases for the Federal Reserve's monetary policy decisions, and uncertainty regarding data releases may lead to increased volatility in the crypto market, wider bid-ask spreads, especially for tokens with lower liquidity.
II. Potential impacts of Trump's increased actions
Intensification of market volatility: If Trump intensifies actions to address the government shutdown, it may trigger further concerns in the market about political stability, thereby exacerbating short-term volatility in the crypto market. Investors may reduce their investment in crypto assets due to rising risk aversion, leading to a drop in market prices.
Delayed regulatory progress: The Trump administration may respond to the government shutdown through administrative means or policy adjustments, which may further delay the review and implementation of cryptocurrency-related regulatory bills. This will keep the crypto industry in a state of regulatory uncertainty for a long time, affecting long-term planning for businesses and investor confidence.
Erosion of investor confidence: The government shutdown and the Trump administration's response measures may weaken investor confidence in the political and fiscal stability of the United States. This loss of confidence may lead to funds flowing out of the crypto market into safer asset classes, such as gold and the U.S. dollar.
III. Long-term impacts and uncertainties
Hedge attributes of decentralized assets: If the government shutdown lasts for a long time and damages market trust in U.S. finances, it may instead drive up the demand for decentralized assets like Bitcoin as alternative hedging tools. These assets, due to their decentralization and anonymity, may become a safe haven for investors in uncertain environments.
Uncertainty of policy implementation: Despite the Trump administration possibly introducing a series of policies to address the government shutdown, there is uncertainty regarding the effectiveness and impact of these policies. Discrepancies during the policy implementation process may lead to fluctuations in market sentiment, triggering unnecessary panic and crashes.
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