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👀 This will dominate headlines this week

👀 This will dominate headlines this week

PLUS: The #1 owner of bitcoin

Alex M.
September 25, 2023

GM everyone. This is 2036, the crypto newsletter that pays you.

Here’s what we’re serving up today 🍲: in exactly 7 days, non-essential parts of the US federal government risk shutting down. What does this mean for crypto prices?

Let’s dig in.

🥔 Today’s meat and potatoes

Get smarter on crypto in 2 minutes

Ladies and gentlemen - it’s that time of the year again.

On October 1, the funding of the US government expires.

Congress has to pass 12 spending bills this week for the federal government to operate normally after October 1st.

As usual, Republicans and Democrats can’t agree on the size of the federal budget and eventual spending cuts.

If they can’t figure it out, the US government shutdown will probably be the main headline this week - and it’ll take effect on Monday (October 1 is a Sunday).

We don’t take sides here at 2036.

Instead, let’s look at what a government shutdown means for markets and crypto.

1/ The average government shutdown lasts just 8 days.

And the last time it happened was in 2018.

That means that - on average - it’s not as bad as the media wants you to believe.

Now, here’s where it gets interesting….

It’s easy to assume that a government shutdown can cause havoc in the markets. Afterall, what markets hate most is uncertainty.

But…

2/ Government shutdowns are typically high profile and low impact.

Sure - a few defense, healthcare, and contracting firms might take a short-term hit. And yes, some government workers will be affected.

But the larger economy, corporate earnings, and interest rates are largely unaffected by a federal government shutdown.

It’s mostly a political circus of back and forth.

But historically, any dips in risk assets have been short-lived.

In fact…

3/ During the last shutdown in 2018-2019, stocks ended up +13%.

Sure, that’s not gonna happen every time.

But one study by Lerner estimates that the average impact of a US government shutdown on the stock market is exactly 0.0%.

A nothing-burger 🍔

So, whereas the media will cry wolf about the impact on asset prices…

4/ Historically, we’re entering the most bullish season in risk assets.

October, November, and December are typically some of the best months for risk assets - including crypto.

But wait - it gets better…

5/ The next wave of bitcoin ETF decisions is due in the middle of October:

If it gets approved, it’ll change everything.

For the first time in 14 years, institutions will be able to easily:

borrow money to buy bitcoin
borrow against bitcoin to purchase other things

That’s why, for crypto, the government shutdown is mostly noise.

Sure - if the shutdown lasts for months, it could impact the data used by the Federal Reserve to make decisions on interest rates - which affect crypto.

But that’s a long shot.

The fundamentals of bitcoin have never been better:

The bitcoin halving is coming. Miners are the biggest sellers of bitcoin, and their selling pressure will be cut in half.
The bitcoin ETF is coming. It’s the only ETF on a commodity that’s scarce. And every large bank is looking to onboard its clients into it.
New fair-value accounting rules will make it substantially easier for companies to own bitcoin. If bitcoin becomes an alternative to bonds and cash - companies will gradually load up over time (1%, 2%, 5%, etc.)

So although his week may sound ugly - fear not.

This too shall pass.