Bitcoin rallies to within 1% of all-time high, gaining safe-haven status during shutdown

Bitcoin rallied 2% to $123,874, nearing its all-time high, as the U.S. government shutdown prompted investors to seek decentralized assets, reflecting its growing role as a hedge against "US government risks." This 12% weekly surge, unlike previous shutdowns, has led Standard Chartered to project new highs and a potential move to $135,000, amidst broader investor hedging seen in rising gold prices and some stock market gains.

Analysis

Bitcoin rallied on Friday to within striking distance of its record high as the U.S. government's shutdown entered its third day. The world's oldest cryptocurrency is trading up roughly 2% on the day at $123,874. That's about 1% below its all-time high price of just north of $124,000, which it reached in mid-August. Investors are flocking to the decentralized asset after U.S. lawmakers failed to strike a deal on federal funding, forcing the U.S. government to shut down on Wednesday. Bitcoin surged 12% this week alone. "The shutdown matters this time around," wrote Standard Chartered's Geoff Kendrick. "During the previous Trump shutdown (22 Dec 2018 to 25 Jan 2019) Bitcoin was in a different place than now, so it did little." "However, this year bitcoin has traded with 'US government risks' as best shown by its relationship to US treasury term premium," added Kendrick. Standard Chartered expects a new high soon and ultimately the crypto hitting $135,000 after that. Traders are turning to crypto and other assets to hedge against mounting political and economic tensions. Spot gold rose 0.5% to $3,876.55 per ounce on early Friday, with prices gaining more than 2% this week. Traders also poured some money into stocks on Friday, despite the increasing geopolitical uncertainties. The S&P 500 and Nasdaq Composite also rose 0.5% and 0.27% on the day, respectively. Bitcoin is demonstrating strong performance as a perceived hedge against U.S. fiscal instability, rallying approximately 2% to $123,874, placing it just 1% below its mid-August all-time high. The primary catalyst is the U.S. government shutdown, which has driven a 12% weekly surge in the asset. According to analysis from Standard Chartered, Bitcoin's current market behavior marks a significant shift from previous shutdowns, such as the one in 2018-2019, as it now trades in correlation with 'US government risks,' akin to movements in the U.S. treasury term premium. This has led the bank to forecast a new imminent high, with a subsequent price target of $135,000. The move is part of a broader trend of investor hedging, evidenced by a parallel 0.5% rise in spot gold prices and modest gains in the S&P 500 and Nasdaq Composite, indicating a complex risk appetite rather than a simple flight to safety.

Key Decisions for Investors

• Given the strong momentum and a specific macro catalyst, investors could consider the potential for a breakout above the all-time high, with Standard Chartered's $135,000 forecast serving as a near-term price objective.
• The rally's direct link to the U.S. government shutdown creates a significant event risk; any signs of a political resolution could rapidly reverse recent gains, warranting close monitoring of fiscal negotiations.
• While Bitcoin is acting as a hedge, its high volatility should be weighed against traditional safe-haven assets like gold, which also saw gains, suggesting a diversified approach to hedging against geopolitical and fiscal uncertainty may be prudent.