Electronic Money faces chaos as the risk of a U.S. government shutdown reaches 66%

The risk of the U.S. government shutting down before October 1 is weighing heavily on global financial markets, including the cryptocurrency sector.

The probability of a shutdown has increased to 66% on the Polymarket platform, reflecting growing concerns among investors. In this context, experts predict that the market may witness both short-term sell-offs and strong recovery opportunities as liquidity returns.

66% probability that the American government will shut down

The possibility of the American government shutting down before October 1 is attracting increasing attention as budget disagreements between Congress and the White House remain unresolved. History has recorded several shutdowns, with the longest lasting up to 35 days from late 2018 to early 2019.

Forecast on Government Shutdown on Polymarket | Source: PolymarketEach time, shutdowns have negatively impacted market sentiment and the economy. The current situation is particularly noteworthy due to inflation remaining high and the Federal Reserve (Fed) not taking any steps to ease monetary policy, which could exacerbate uncertainty in the economy.

When the budget is not passed, many federal agencies are forced to suspend operations, leading to disruptions in government activities and increasing political risk. This factor often puts pressure on risk assets, from stocks to cryptocurrencies. For cryptocurrency investors, a shutdown not only affects asset prices in the short term but also delays assessments and decisions related to regulation. In other words, while Congress and the government focus on budget issues, policy initiatives related to cryptocurrency are likely to remain "frozen."

News about the U.S. government shutdown impacts S&P 500 | Source: Ted## Expected market scenarios

Market experts and observers have outlined several potential scenarios in this context. In the short term, a potential shutdown could trigger a sell-off across the entire cryptocurrency market. Analysts have described a "cryptocurrency run," in which fear causes capital flows into safe assets like stablecoins or Bitcoin, leading to significant price volatility among altcoins.

A commonly mentioned scenario is that risky assets will continue to be sold off if a shutdown occurs. However, once the budget issue is resolved, the "liquidity door" may reopen, allowing the market to recover quickly. Some analysts believe that Bitcoin could benefit from its role as a safe haven during times of crisis and has the potential to increase in price when liquidity returns.

In addition to the price fluctuations, the government shutdown will temporarily halt the operations of agencies such as the SEC and CFTC, slowing down the progress of cryptocurrency projects as well as the approval of ETFs/ETNs. Congress will also face delays in pushing forward laws related to cryptocurrencies. However, Chainlink's Chief Public Policy Officer remains optimistic about the mid-term outlook.

"A market structure by the end of October is still possible, but this will become more difficult in the context of a shutdown," Adam Minehardt commented.

Forecasts for the likelihood of a government shutdown are gradually decreasing | Source: XDDespite a history of shutdowns, last-minute agreements are often reached in America. Moreover, the probability of a shutdown has decreased from 78% to 66%, indicating that the market still maintains a level of confidence that a viable solution can be found.

Mr. Teacher