Is the Bull Run Back? Bitcoin Soars on a Wave of Macro Signals

Bitcoin’s price rallied last week, climbing 12.14% and erasing the losses from a lackluster September. While altcoins largely drove major rallies from July to September, this time the bull run was led by Bitcoin.

Over the same period, major altcoins like Ethereum (ETH) and Solana (SOL) saw more modest gains of 12.90% and 13.24%, respectively.

Sponsored

Sponsored

Bull’s Reasons: Shutdowns, Jobs, and the Fed

The key factor in last week’s rally was the US government shutdown, which began at midnight EST on Wednesday. During a shutdown, US government employees stop working, and the government cannot use its budget. This includes federal employee salaries and other government expenditures.

Market participants saw this situation as a significant source of economic uncertainty, believing it would push the Federal Reserve to cut interest rates at its upcoming FOMC meeting in late October.

According to CME Group’s FedWatch Tool, the probability of a US interest rate cut in October was around 89% on September 30. However, after the government shutdown was confirmed late that afternoon, the probability surged to 98%. At that moment, Bitcoin, which had been trading around the $112,000 level, began its rapid ascent.

Weak jobs data also fueled Bitcoin’s bull run. On Wednesday, the US ADP Employment Report for September came in at -32,000, falling well short of the market’s forecast of +50,000. This data supports the view that the US labor market is downturned.

According to FedWatch, the market is now pricing four additional rate cuts by June next year. Since the shutdown began, the US Republican Party has stated that it will lay off additional federal employees during this period.

The move is seen as an attempt to complete the federal employee cuts that President Donald Trump failed to achieve during his administration. If this attempt succeeds, the US unemployment rate, currently at 4.3%, could rise significantly. With non-farm payrolls already weakening, a rise in unemployment could force the Fed to pursue additional rate cuts.

Sponsored

Sponsored

Japanese Politics Also Plays a Role

On Friday, Sanae Takaichi was elected president of Japan’s Liberal Democratic Party and will likely become prime minister. She is expected to initiate policies that will weaken the yen.

While her predecessor, Fumio Kishida, had been considering raising interest rates to combat inflation, Takaichi’s policies are expected to lead to an easing of monetary policy. Against this backdrop, Bitcoin’s price briefly surged past $125,500 over the weekend, setting a new all-time high.

In summary, Bitcoin’s price bull run results from market participants quickly acting on their future expectations. They are anticipating that global liquidity will ease further in the near future. However, predicting how market sentiment will change if the US government shutdown continues is difficult.

The US Treasury’s bond auctions on Monday and Tuesday will be the most interesting event of this week. Over the two days, the Treasury will issue $249 billion in short-term bonds. According to past precedents, these auctions will likely proceed despite the shutdown.

This would significantly restrict the market’s surplus liquidity without government spending. Bitcoin’s price has risen by over 10% in just three days. It remains to be seen if it can continue to rally amid a short-term liquidity squeeze.

Eyes on Powell’s Thursday Speech

A number of macro indicators are on the agenda this week. On Monday, the Conference Board’s Employment Trends Index will be released.

Tuesday will bring the New York Fed’s Survey of Consumer Expectations. On Wednesday, the minutes from the September FOMC meeting and a US 10-year Treasury auction are scheduled.

And on Thursday, Fed Chair Jerome Powell is set to speak, along with a US 30-year Treasury auction. Several other Fed officials are also scheduled to give public speeches. However, these events are unlikely to shake the market’s strong expectation of a rate cut in October.

Instead, impromptu government shutdown-related measures from the US Congress could impact the market. The Trump administration’s approach to laying off federal employees could also be a source of volatility. Here’s hoping investors have a profitable week.