The U.S. government is about to reopen, and Bitcoin is finally going to rise

The longest government shutdown in U.S. history is finally coming to an end.

The government shut down due to budget disagreements, a phenomenon almost unique to the American political system. The 40-day shutdown significantly impacted global financial markets. The Nasdaq, Bitcoin, tech stocks, the Nikkei index, and even safe-haven assets like U.S. Treasury bonds and gold were not spared.

Even the most rigid bipartisan relations couldn't withstand the desire for everyone to enjoy a good Thanksgiving before November 27. The recently concluded Senate meeting finally secured the 60 votes needed to advance the budget, potentially bringing the longest government shutdown in history to an end, allowing the U.S. government to "open its doors."

Why the Shutdown?

This shutdown stemmed from the failure of Republicans and Democrats to reach an agreement on the fiscal budget after October 1.

That day marked the official expiration of the previous year's federal budget. The Republican Party currently controls both chambers of Congress, but they still lack the 60 votes needed in the Senate to pass the budget, giving the Democrats significant leverage in negotiations.

The core disagreement between the two parties centers around healthcare spending. The Democrats are demanding an extension of the soon-to-expire tax credits to allow millions of Americans to continue enjoying lower health insurance costs while also reversing Trump's cuts to the Medicaid program; the Republicans insist on reducing health and government medical-related spending to control the budget size.

Although the House passed a temporary funding bill to avoid a shutdown, the Senate refused to approve it, leading to the government officially shutting down on October 1 for the first time in nearly seven years.

Insiders revealed that the turning point in this round of negotiations came from a preliminary agreement reached between at least eight moderate Democratic senators and Republican leaders and the White House: in exchange for a vote on extending subsidies under the Affordable Care Act (Obamacare), the government would first "open its doors."

What Consequences Did the Shutdown Bring?

If one were to describe the impact of the government shutdown on the economy, "a hurricane" might be a very apt metaphor.

The first areas to be affected were financing and business approvals: loan permits and company IPO reviews were completely delayed; approximately $800 million in federal contracts could not be signed daily; contractors and suppliers could not receive compensation, many of whom were small businesses reliant on government orders.

This means that for every week the government is shut down, economic growth decreases by 0.1 to 0.2 percentage points, roughly translating to a weekly loss of $15 billion.

As the shutdown drags on, these losses will become harder to recover, especially potentially impacting the traditional consumption peak season in November and December. As White House economic advisor Kevin Hassett warned, the impact of this shutdown "far exceeds expectations," and he even believes that fourth-quarter growth could be halved from the originally projected 3% to 1.5%. Industries such as travel, leisure, and construction have already shown clear signs of being "hurt."

The last significant government shutdown in U.S. history occurred from 2018 to 2019, lasting 35 days due to the controversy over the U.S.-Mexico border wall. Subsequent research by the Congressional Budget Office found that it caused approximately $11 billion in losses to the U.S. economy. However, most of the losses were later recovered, with $3 billion remaining as permanent losses.

This record-setting shutdown has not been easy for those in the cryptocurrency space. Related reading: "Wall Street Continues to Sell Off, How Low Can Bitcoin Go?".

Just in the first week of November, Bitcoin has already dipped to lower points than the "10.11" crash, failing to hold the $100,000 mark and even dropping below $99,000, marking a new low in the past six months, while Ethereum hit a low of $3,000. On the HTX trading platform, a single BTC-USDT long position saw a liquidation of $47.87 million, topping the liquidation leaderboard across the network.

Previous analyses by Wall Street Insights indicated that the shutdown forced the U.S. Treasury to increase its balance in the Federal Reserve's General Account (TGA) from about $300 billion to over $1 trillion in the past three months, reaching a nearly five-year high. This process effectively withdrew over $700 billion in cash from the market.

With the market short on cash, the cryptocurrency space has also seen liquidity drained.

From October 29 to November 3, BlackRock's IBIT, the largest Bitcoin spot ETF with a 45% market share, saw a cumulative net outflow of $715 million over four trading days, accounting for more than half of the total outflow of $1.34 billion in the U.S. Bitcoin ETF market.

Looking at the entire week, from October 28 to November 3, IBIT had a net outflow of $403 million, representing 50.4% of the total market outflow of $799 million, with a single-day outflow of $149 million on October 31, setting a record for the highest single-day outflow in the industry.

Even more significant than ETFs are the long-term holders on the blockchain.

In the past 30 days (from October 5 to November 4), wallets that have held Bitcoin for more than 155 days, known as "long-term holders" (LTH), have cumulatively sold approximately 405,000 BTC, accounting for 2% of the circulating supply. Based on an average price of $105,000 during this period, they cashed out over $42 billion.

When Will the Market Rise?

Although the government funding plan has not yet fully materialized, the market has already shown signs of movement, with U.S. stock index futures soaring during the Asian trading session.

We can continue to track the following dimensions to help assess the direction of fiscal policy and liquidity moving forward.

First is the U.S. Treasury's General Account (Treasury General Account, TGA). Related reading: "Why Does the U.S. Government Need to Open for Bitcoin to Rise?".

This can be understood as the central checking account established by the U.S. government at the Federal Reserve. All federal revenues, whether from taxes or the issuance of government bonds, are deposited into this account. All government expenditures, from paying civil servant salaries to defense spending, are also drawn from this account. Under normal circumstances, the TGA acts as a transit station for funds, maintaining a dynamic balance. The Treasury collects money and then quickly spends it, flowing into the private financial system, becoming bank reserves, and providing liquidity to the market.

The government shutdown disrupted this cycle. The Treasury continues to collect money through taxes and bond issuance, causing the TGA balance to grow. However, due to Congress not approving the budget, most government departments are closed, and the Treasury cannot spend as planned. The TGA has turned into a financial black hole that only takes in funds.

Since the shutdown began on October 10, 2025, the TGA balance has ballooned from about $800 billion to over $1 trillion by October 30. In just 20 days, over $200 billion in funds have been withdrawn from the market and locked away in the Federal Reserve's vault.

U.S. government's TGA balance | Source: MicroMacro

The TGA is the "cause" of the liquidity crisis, while the soaring overnight lending rates are the most direct symptom of the financial system "running a fever."

The overnight lending market is where banks lend short-term funds to each other, serving as the capillaries of the entire financial system. Its interest rate is the most accurate indicator of the tightness of "money roots" between banks. When liquidity is abundant, borrowing between banks is easy, and rates remain stable. But when liquidity is drained, banks start to run short on cash and are willing to pay a higher price to borrow overnight.

This leads to two other key indicators: SOFR (Secured Overnight Financing Rate) and the usage of the Fed's SRF (Standing Repo Facility).

On October 31, SOFR surged to 4.22%, marking the largest daily increase in a year. This not only exceeded the Federal Reserve's upper limit of the federal funds rate of 4.00% but also surpassed the effective federal funds rate by 32 basis points, reaching the highest point since the market crisis in March 2020. The actual borrowing costs in the interbank market have spiraled out of control, far exceeding the central bank's policy rate.

Secured Overnight Financing Rate (SOFR) index | Source: Federal Reserve Bank of New York

The SRF is an emergency liquidity tool provided by the Federal Reserve for banks. When banks cannot borrow money in the market, they can pledge high-grade bonds to the Fed in exchange for cash. On October 31, the usage of the SRF soared to $50.35 billion, setting a record high since the pandemic crisis in March 2020. The banking system is facing a severe dollar shortage and has no choice but to knock on the last door of the Federal Reserve for help.

Standing Repo Facility (SRF) usage | Source: Federal Reserve Bank of New York

Beyond the fiscal side, we can also track the pace of U.S. Treasury bond issuance, short-term interest rates, and the response of RRP (Reverse Repurchase Agreement) balances. If a combination of "large-scale Treasury issuance + significant decline in RRP balances" occurs, it indicates that liquidity is being shifted from money market funds to Treasury bonds, which will further influence the performance of risk assets. Additionally, the quarterly refinancing plan (QRA) released by the Treasury at the end of the month is also an important signal to observe government cash needs and financing pressures.

Moreover, there are still several key procedural steps worth noting. Even if the House votes to pass the bill, it still needs to go through the Senate vote and the President's signature to take effect.

According to relevant information, after the procedural vote passes, the Senate must amend three appropriations bills (legislative, military construction, and agriculture, including the SNAP program) and then send them back to the House. Each amendment will trigger a 30-hour debate period, which could delay the process.

If the Democrats choose to extend these debates, the government may not reopen until Wednesday or Thursday. However, if they expedite the "end of the government shutdown" process, it could be completed tonight, allowing the U.S. government to reopen tomorrow night. Any delays would mean that the "shutdown risk" has not been completely eliminated.

Therefore, completing the entire process for the government to "open its doors" is expected to take several days to a week. For cryptocurrency, this may be the last "entry zone" before a potential small bull market arrives.

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