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Bitcoin, Ether gain; Wall Street on edge amid government shutdown fears

Bitcoin was trading above US$26,300 Thursday morning in Asia after briefly breaching US$26,800 Wednesday evening. Ether also made up some ground, rising above the US$1,600 resistance level before falling back to just below it. Other top 10 non-stablecoin cryptocurrencies traded mixed, with the Open Network’s (TON) Toncoin leading the winners. U.S. stock futures were up after Wall Street closed mixed on Wednesday. Investors are digesting a 16-year high in U.S. 10-year treasury yields as well as a potential debt-driven government shutdown in October.

SEC delays another spot Bitcoin ETF decision

Bitcoin gained 0.56% to US$26,354.64 in the 24 hours to 07:40 a.m. in Hong Kong but still held a weekly loss of 2.87%, according to CoinMarketCap data. The world’s largest cryptocurrency on Wednesday night briefly rose above US$26,800 for the first time in the past seven days, but soon retreated to around US$26,300.

The U.S. dollar index (DXY), which measures the greenback against a basket of other major fiat currencies, reached a ten-month high of 106.84 on Thursday.

A high DXY has been a bearish signal for cryptos and the S&P 500 alike, blockchain intelligence firm Santiment said Thursday on X (previously Twitter). However, Bitcoin has “held up well” despite the rise in the U.S. dollar. That “may indicate a breakout could come once the DXY settles down,” Santiment added.

Along with Bitcoin, Ether edged up 0.31% to US$1,597.56 over the past 24 hours but is trading 1.55% lower for the week. The token also hit a seven-day high of US$1,631.91 on Wednesday evening.

The price moves in the crypto market yesterday were driven by macro markets, said Justin d’Anethan, head of Asia-Pacific business development at Belgium-based crypto market maker Keyrock.

“Overnight Asia time, American investors started the day full of optimism, attempting to reverse this week’s pullback… only to turn risk-off again in the second half of the day and close in the red,” d’Anethan said.

“While traditional markets suffered, crypto actually outperformed, rising and then pulling back but only to return to a neutral position. BTC and ETH are essentially flat or timidly up on the session,” d’Anethan added.

Other top 10 non-stablecoin cryptocurrencies traded mixed for the past 24 hours. Toncoin, the native token of TON, led the winners with a 2.21% increase to US$2.17, but was still down 9.96% for the week. Polkadot’s DOT token led the losers, edging 0.56% lower to US$3.99 for a 3.63% weekly loss.

On the regulatory front, the U.S. Securities and Exchange Commission (SEC) on Tuesday delayed a decision on the spot Bitcoin exchange-traded fund (ETF) application made by Cathie Woods’ Ark Investment Management and Swiss digital asset brokerage 21Shares.

The SEC was scheduled to make a decision by November 11 but it has now pushed that date back to January 10. The agency has delayed its decision multiple times on ETF applications from not only Ark and 21Shares, but also BlackRock, WisdomTree and Invesco Galaxy.

The delay was made after four Congress members urged the SEC to approve pending spot Bitcoin ETF applications. At a Wednesday Congress hearing, SEC Chair Gary Gensler was questioned by multiple Congress members about his agency’s aggressive stance on crypto assets. But he stuck to the claim that most cryptos other than Bitcoin should be classified as securities and regulated by the SEC.

Despite the pressure from Congress, Markus Thielen, head of research and strategy at digital asset service platform Matrixport, wrote in an emailed comment that “Gensler refused to release any details where the SEC stands in the (spot Bitcoin ETF) application process and rather criticised industry practices. This caused Bitcoin prices to retrace their rally attempt (yesterday).”

On the subject of Gensler’s speech, Keyrock’s d’Anethan said “it feels like American regulators are pushed more and more to take some action and I choose to see that as bullish: it’s a question of when they’ll give in, not if.”

The total crypto market capitalization edged up 0.35% in the past 24 hours to US$1.05 trillion, while trading volume rose 20.25% to US$27.26 billion.

Wall Street facing possible government shutdown

GettyImages 1704642244
Image: Getty Images

U.S. stock futures were higher as of 09:50 a.m. in Hong Kong. The Nasdaq futures index led the gains with a 0.21% increase. Wall Street closed mixed Wednesday. The Dow Jones Industrial Average logged losses, while the S&P 500 and Nasdaq Composite edged higher.

Major Asian stock indexes were mixed on Tuesday morning. China’s Shanghai Composite and South Korea’s Kospi booked gains, while Hong Kong’s Hang Seng and Japan’s Nikkei 225 dipped.

The U.S. government could partially shut down as early as Sunday as Congress struggles to pass a funding bill to support the operations through Nov. 17. If Congress fails to pass the bill by the end of September, a lapse in government funding could impact non-essential government functions and payment to government employees.

The U.S. government has had three partial shutdowns due to funding lapses in the past decade.

“More likely than not, we are going to see a government shutdown,” Emerson Sprick, senior economic analyst at U.S.-based think tank the Bipartisan Policy Center, told CNBC on Wednesday. “The question is for how long … How long it lasts has a real impact on American households, to a greater extent than just if it happens or not.”

About 1.3 million active-duty military and 2 million civilian federal employees would go without pay for the duration of any shutdown, Bloomberg reported Wednesday.

“The more a shutdown lasts, the more it goes beyond federal employees,” Goldman Sachs analyst Alec Phillips told Bloomberg. “The longer it goes on, the indirect impact becomes larger.”

Beyond government shutdown concerns, the U.S. stock market is also feeling the pressure of rising oil prices and U.S. treasury yields. The global oil price benchmark Brent crude finished at US$96.55 on Wednesday, its highest close since November 2022. The U.S. 10-year treasury yields settled at 4.625%, the highest close since October 2007.

On the inflation front, Minneapolis Federal Reserve President Neel Kashkari told CNBC on Wednesday he was unsure if the current U.S. interest rate of between 5.25% and 5.50% is “sufficiently restrictive” to bring the annual inflation rate below the Fed’s long-term goal of 2%. Kashkari said further hikes cannot be ruled out “given the dynamics of the reopening of the economy.”

The Fed meets on Nov. 1 to make its next decision on interest rates. The CME FedWatch Tool predicts a 77.6% chance of no interest rate hike in November, down from 82.5% on Wednesday. It also gives a 57.8% chance of another pause in December, down from 65.8% on Wednesday.

Investors now await the U.S. second-quarter personal consumption expenditure price index (PCE) on Thursday, which will provide further insights into inflation. Several Federal Reserve officials including Fed Chair Jerome Powell will also give speeches on Thursday.

(Updates with equity section.)

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