The government shutdown is draining dollars, while Bitcoin is quietly waiting behind the “floodgate”: Is $88K a trap or a golden opportunity?

As the US government enters its second month of shutdown, global risk assets are on hold. The crypto market is hit hardest—Bitcoin has retreated over 20% from its October high, Ethereum has fallen below $3,900, and leveraged liquidations along with ETF fund outflows are playing out in succession. However, while Wall Street focuses on “how long the shutdown will last,” seasoned digital asset investors are already questioning: after the shutdown ends, where will the trillions of dollars of liquidity flow? Historical experience shows that each Washington fiscal drama ultimately ends with cheaper dollars, and Bitcoin is the most sensitive indicator on the “cheap dollar valuation chart.” This article aims to dissect the liquidity gears behind the “shutdown” and provide actionable positioning strategies.

1. The “Pumping” of the Shutdown: How TGA drains dollars from the market

- The Treasury General Account (TGA) balance has surpassed $1.1 trillion, with daily disbursements reduced by about $25 billion, effectively pulling $75 billion of base money from the system each month.

- The liquidity drain widens the short-term dollar interest rates (SOFR), which has risen an average of 12 basis points monthly; reverse repurchase (RRP) balances plummet; stablecoin premiums (USDC/CNY) have fallen from +0.3% to -1.1%, indicating a “dollar scarcity illusion.”

- Data gaps amplify volatility: CPI and non-farm payrolls are absent; implied volatility in interest rate futures hits yearly highs; the 30-day rolling correlation between crypto and US Treasuries spikes to 0.68, a level not seen since October 2022.

2. Liquidity “countdown”: Why the longer the shutdown, the more aggressive the liquidity injection

- The debt ceiling and appropriations negotiations are likely to end with a “pause on the ceiling + additional spending”; CBO estimates an additional $1.8 trillion in debt issuance for FY2025.

- The Treasury aims to rebuild cash reserves to only $600 billion, meaning at least $500 billion of net liquidity will be released once the shutdown ends.

- The Fed’s RRP still holds $400 billion as a “buffer”; once TGA releases floodwaters, RRP will be exhausted first, and the incremental funds will spill over into risk assets—similar to the April 2020 scenario, which took only 6 weeks.

3. Historical replay: Bitcoin’s performance during three shutdowns

- October 2013 (16 days): Within 30 days after the shutdown ended, BTC rose 54%, and the weighted average US interest rate fell 18 basis points.

- 2018–2019 (35 days): BTC increased 15% within 30 days post-shutdown, amid emergency liquidity measures like BTFP by the Fed.

- 2025 (? days): If the shutdown exceeds 45 days, based on the “drain and leak” model, BTC’s expected beta is 1.9, with a potential rebound range of 25%–35%.

4. On-chain data: Who is selling, who is accumulating

- Spot ETF outflows total $1.27 billion, but GBTC discount narrows to 3%, indicating institutions are not panicking but reallocating into lower-fee ETFs.

- Exchange balances drop to 2.3 million BTC, the lowest since March 2018; meanwhile, over 70% of holdings have not moved in over a year, showing long-term holders remain committed.

- Stablecoin market cap has increased by $8 billion overall, with USDe (Ethena) up $3.2 billion, reflecting strong “short-term hedging” demand; a reversal could trigger a short squeeze.

5. Scenario matrix: How investors should respond at different stages

Scenario A (Shutdown ≤45 days, mild restart):

- The Fed passively absorbs Treasury debt, RRP drops to $100 billion; BTC range: $95K–$110K.

- Strategy: Maintain 80% core holdings, add 20% stablecoins below $95K in a laddered manner, leverage ≤1.2x.

Scenario B (Shutdown >45 days, debt ceiling extension to 2026):

- Treasury reduces TGA to $400 billion; potential Fed QE micro-restart; BTC range: $110K–$135K.

- Strategy: Convert stablecoins to BTC/ETH in advance, allocate some L2 and high-beta assets like SOL, leverage up to 1.5x, with a 10% trailing stop.

Scenario C (Shutdown unresolved, technical default risk):

- USD swap spreads spike sharply; BTC and gold plunge 15%, then quickly V-recover.

- Strategy: Keep 30% in stablecoins, buy short-term bullish options (Δ≈0.3) during panic, using straddle structures to capture volatility.

6. Action checklist (ready for immediate execution)

- Stop-loss: Reduce 20% of BTC spot if below $88K; cut 15% ETH if below $3K to prevent deep bear market losses.

- Hedging: Use USDe + perpetual shorts to earn 15–20% annualized funding, offsetting time decay.

- Bottom-fishing:

- Tier 1: Buy BTC at $92K–$95K, allocate 20% of total position.

- Tier 2: Buy BTC at $85K–$88K, allocate 30%.

- Tier 3: Pause below $80K, wait for default fears to subside before adding.

- Signal monitoring:

- US Congress voting schedule (Clerk of the House).

- Daily TGA balances (Treasury Bureau of the Fiscal Service).

- RRP balance dropping below $200 billion, signaling “floodgate opening.”

The government shutdown is a cyclical Washington political performance, but it pushes the dollar liquidity valve to its limit. For crypto markets, each “shutdown” repeats the same script: drain dollars first, then flood them back. The only question is whether you’re still in the game when the liquidity surge resumes. Keep leverage moderate, layer cash reserves, and set clear stop-losses. When TGA begins to decline, Bitcoin will not hesitate—it will simply tell the world with its price that cheap dollars are back. #GateWeb3LaunchpadBOB上线 #广场发币瓜分千U奖池 #CryptoMarketCorrection