The Anomaly May Be Coming to an End

Starting from the first of October, a colossal anomaly occurred that heavily impacted the price of Bitcoin. 

This anomaly clearly emerges from the analysis of the charts, even though it does not directly concern Bitcoin, and it is not clearly evident from the Bitcoin price trend charts. 

To grasp it clearly, and especially to analyze its evolution, it is necessary to focus the analysis on other assets.

The Market Anomaly

The issue was the duration of the USA government shutdown. 

In the past, there had already been other U.S. government shutdowns, but they had always lasted much less. The one that began on the first of October, however, was the longest in history. In short, a truly colossal anomaly. 

The point is that during the shutdown, the US government was unable to inject the dollars it was collecting into the markets, leading to an accumulation of over 150 billion dollars in just five weeks. 

This is a significant amount that would not have been accumulated under normal circumstances. However, due to the fact that until November 12 the U.S. government could not use those funds, it effectively resulted in a real liquidity drain from the markets. 

The amount drained was not significant when compared to the daily trading volumes of financial markets, but it should not be forgotten that the crypto markets are still much smaller than traditional ones. Thus, this small liquidity crisis ended up having a much greater impact on BTC/USD than, for example, on the S&P500. 

The End of the Anomaly

The shutdown officially ended on November 12, but in the following seven days, only slightly more than 10 of the 150 billion drained in the previous weeks were released into the markets. 

However, in the following week, which ended in the middle of last week, another 40 were released, bringing the billions released after the end of the shutdown to 50 out of 150. 

The data for the current week will only be available tomorrow late evening, but it is already possible to imagine that it might at least be in line with that of the previous week. 

In fact, by comparing the trend of the Dollar Index (DXY) with that of the M2 Global Liquidity Index, it clearly emerges that yesterday there was a trend reversal. 

The M2 Global Liquidity Index measures the total liquidity available worldwide by aggregating all major currencies and converting them into US dollars (USD) for comparison purposes. 

In particular, it measures the existing liquidity, not the circulating one, therefore it does not take into account the fact that 150 billion have been immobilized in US government accounts from October 1st to November 12th. 

Instead, DXY fluctuates with the changes in the actual circulating liquidity, thus it has been affected by this minor liquidity crisis. 

Starting from October 1st, the M2 Global Liquidity Index has been moving sideways within a narrow channel where it still remains, while the DXY entered an ascending channel from which it only exited yesterday. This divergence is likely due to the small dollar liquidity crisis described above. 

The Effects on Bitcoin

The effect of this dynamic on the price of Bitcoin has been threefold. 

Initially, and particularly starting from October 7, it prevented the bullrun from continuing. 

At the time, it had just reached new all-time highs after a +14% increase in less than two weeks. 

Subsequently, starting from November 3, it significantly dropped by -23% in just over two weeks. 

In a third phase, starting from November 22, it triggered a rebound that, however, was interrupted a few days ago (Monday) due to the mini speculative bubble that had inflated on silver. 

Yesterday, however, things might have changed, as the reversal of the Dollar Index trend suggests that the genuine path out of the anomaly caused by the shutdown may have begun. 

At this point, therefore, there could also be a fourth effect, which has not yet manifested. 

Bitcoin Price Predictions: Is the Christmas Rally Finally Coming?

This fourth effect could theoretically be a strong rebound that might kick off the so-called Christmas rally, which has been discussed for several weeks now. 

It must be noted that in traditional markets, Christmas rallies are not a novelty. They are genuine small bull runs that kick off around mid-December, or slightly earlier, and continue until the end of the year or the first few days after New Year’s. 

For weeks now, there has been discussion about the possibility of a Christmas rally on traditional stock exchanges in December, and everything suggests that the fourth effect on BTC/USD could indeed be this. 

Indeed, in the medium-short term, it is possible that DXY will continue to decline, as it has been doing since the end of November, following a trend similar to that of late 2017. 

2017 was Donald Trump’s first year in the White House during his first term, while 2025 is Donald Trump’s first year in the White House during his second term. 

At that time, right towards the end of November, a decline in the Dollar Index began, which extended even throughout the following January. If this dynamic were to repeat, a Christmas rally on BTC/USD could become particularly likely.