Bitcoin is back in the news, spiking sharply higher as the U.S. government is still partly shut down for a third consecutive day.
The world’s most widely used digital currency surged around 2% on Friday and is now trading close to $123,874, just a step below its all-time high of a bit over $124,000 it set in August. This week alone, Bitcoin has risen by about 12%, which demonstrates how much investors are reacting to what is happening in Washington.
Why is Bitcoin spiking?
The rally follows as political stalemate in the United States worsens. Legislators have not been able to reach a consensus on a federal budget, resulting in a government shutdown that has suspended many services and left markets in suspense. When uncertainty like this has an epidemic effect, investors tend to begin searching for assets that function outside the control of central banks and governments, and Bitcoin is just the thing.
As noted by Geoff Kendrick, a senior analyst at Standard Chartered, this shutdown differs from the one that occurred in late 2018 during Donald Trump’s administration. At that time, Bitcoin was still regarded as a niche digital test, so its price did not respond much. But not this time around. Kendrick said that Bitcoin has become sensitive to “U.S.”. government risks, or its price now responds to political and financial uncertainty within the nation. He noted that this is reflected in how closely Bitcoin’s price now correlates with U.S. Treasury yield movements.
Standard Chartered anticipates Bitcoin will establish a new record high shortly and potentially move higher towards $135,000 if the momentum is sustained. Most traders concur that in the event of the government shutdown lasting longer or confidence in the traditional markets continues to erode further, Bitcoin has the potential to draw even more investors seeking refuge outside the system.
Meanwhile, other safe-haven currencies are also rising. Gold prices increased by 0.5% on Friday to about $3,876.55 per ounce, more than a 2% increase this week. Gold, similar to Bitcoin, is usually regarded as a safe haven of value when financial or political uncertainties increase.
Interestingly enough, in spite of the prevailing ambiguity, investors have not fully forsaken conventional markets. The S&P 500 rose 0.5%, and the Nasdaq Composite went up by 0.27% on Friday. This implies that even as some traders are gravitating towards crypto and precious metals, others remain optimistic about the stock market’s strength.
By and large, Bitcoin’s recent rally is a clear indication of the progress made by the asset. What was perceived as a speculative asset is now being regarded as a serious financial haven in times of national and international instability. As the U.S. shutdown drags on and financial risks mount up, Bitcoin’s image as “digital gold” is getting more solid than ever. The debate now is no longer if Bitcoin will break a new record, but when it will.
