A US Government Shutdown Could Significantly Impact Bitcoin (BTC), Ethereum (ETH), Broader Financial Markets – Report

As of late, financial markets have been gripped with the reality that the US government may be headed toward a shutdown due to Congress’s “inability to pass the federal appropriations bill for the upcoming fiscal year, which begins on October 1st,” the team at NYDIG Research notes.

NYDIG adds that if it appears that federal government shutdowns “are becoming increasingly common, it’s because they are.” Over the years, there have “been 10 instances of funding shortfalls leading to furloughed federal government employees, some lasting only a few hours.”

The researchers added that if we were to “make an educated guess, considering the political polarization between the left and the right, which has progressively intensified over time, it is likely that this shutdown would fall towards the longer end of the spectrum.”

On Monday, Moody’s, the only major rating agency “to still have a AAA credit rating on the US, warned that a government shutdown would likely have negative repercussions to its rating.”

Whether that might result in a negative outlook or downgrade is still “open for debate, but the ratings agency is concerned about the US’s weakening fiscal policymaking procedures amidst rising debt costs associated with rising interest rates.”

Regarding spot bitcoin ETFs, the SEC has already “initiated delays in making decisions for most ETFs, including those with response deadlines out into November.”

This includes the iShares Bitcoin Trust from BlackRock. This suggests that the SEC is “preparing for a potential prolonged shutdown and aims to grant itself maximum flexibility in the approval process.”

NYDIG anticipate “renewed interest in a spot ETF once a federal budget is signed into law and employees come back from furlough, but not before then.”

Ultimately, the SEC will need “to decide on the entire spot bitcoin industry by January 10th, 2024.”

This deadline is significant “as it pertains to the Ark 21Shares product, which has the earliest final decision deadline.” The researchers believe that it is possible “that the SEC will adopt a consistent approach for all ETFs in the process, avoiding favoritism, and either approving or denying them all at the same time.”

According to the update from NYDIG, it seems that “the Ethereum futures ETFs are on the cusp of launching, with VanEck and Valkyrie recently updating registration statements to ensure they become effective before the SEC’s hiatus.”

However, when it comes to the spot Ethereum products, “the SEC shows no interest in even considering them at this time.”

The agency swiftly postponed the decision “on the spot ETFs, some of them the same day they hit the Federal Register, bouncing them to the next deadline.”

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