Bitcoin (BTC) jumped to its highest in over two months as the U.S. government shut down operations, likely setting the stage for a positive fiat liquidity impulse.
The leading cryptocurrency has risen nearly 4% in the past 24 hours, with prices briefly rising to $119,455 for the first time since mid-August, CoinDesk data show. Other major tokens such as ether (ETH), XRP (XRP), solana (SOL) and dogecoin (DOGE) have risen 4% to 7%. The CoinDesk 20 Index (CD20) has jumped 5% to 4,217 points.
The rally follows a U.S. government shutdown on Wednesday after a deeply divided Congress prevented officials from reaching a funding deal.
The shutdown could delay Friday’s nonfarm payrolls report, the official monthly jobs figure, which would eventually set the stage for a positive liquidity impulse or expansion of liquidity in the financial system. This often results in easier access to funding, reduces cost of borrowing and encourages economic growth and risk-taking in financial markets.
“If ADP is a leading signal and the BLS print is delayed, the Fed is likely to deliver a 25 bp cut in October and pair it with guidance that keeps a second cut on the table by December, alongside an early nod toward tapering quantitative tightening (QT). That mix should pull real yields lower and soften the dollar into Q4, with a mild bear-steepening in the curve and gold staying bid. Net effect: a positive liquidity impulse that historically supports BTC,” Matt Mena, Crypto Research Strategist at 21Shares said in an email.
Wednesday’s ADP private payrolls report painted a bleak picture of the labor market, strengthening the case for continued rate cuts by the Fed. The central bank cut rates by 25 basis points last month, while hinting at additional easing in the coming months.
Mena added that BTC’s price gain in the wake of the government shutdown could be a hint of an impending explosive rally.
“The message is clear: with traditional data releases in flux and macro uncertainty running high, Bitcoin remains one of the few assets that thrives when the old playbook breaks down. Investors should be watching this moment closely – it could mark the next explosive leg higher in crypto markets,” he noted.
Options look cheap
One way to play the impending big move, while being hedged, could be through Deribit-listed options, which look cheap at the front-end, according to Amberdata’s Director of Derivatives Greg Magadini.
“After a long ‘dry spell’ for BTC volatility, the U.S. government shutdown could finally be the catalyst to make BTC move a lot,” Magadini told CoinDesk. “This, coupled with the steep contango in implied volatility term structure, makes options look cheap.”
The steep contango in the implied volatility (IV) term structure, represented by an upward-sloping IV curve from near-term to longer-term maturities, indicates that the market expects future volatility to be significantly higher than the near-term volatility.
This makes near-term options relatively cheap. Option prices are influenced by implied volatility.
Magadini cited long straddle as one of the preferred strategies to play the impending volatility boom. It involves the simultaneous purchase of both call and put options at the same strike price and with the same expiry. The call option gains value when the underlying asset’s price rises, while the put option provides protection against price declines. Together, this means the straddle buyer profits from significant price movements in either direction.
“The USD is likely to see flows on the back of the Shutdown and this week’s payroll number… which will guide the Fed. These catalysts could either cause BTC to rally (as a dollar hedge) or crash (if risk assets panic),” he said, explaining the bias for straddle.