Key Takeaways:
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A resolution on the US government shutdown could spark a brief squeeze, but traders remain skeptical that this alone can sustain bitcoin’s move beyond $112,000.
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Investor caution is growing as AI valuations and weak consumer earnings weigh on risk appetite, limiting confidence in Bitcoin’s potential rally.
Bitcoin (BTC) reclaimed the $106,000 level on Monday as a US government shutdown appeared imminent. Analysts warned that an extended funding could dampen consumption, especially after thousands of flights were cancelled. While the Tech-Heavy NASDAQ index rose 1.5%, the cryptocurrency market followed suit.
Traders are now evaluating whether Bitcoin’s latest gains can hold amid weak demand for bullish positions in BTC derivatives.
Two-month BTC futures are currently trading at a 4% premium to market places, which is below the 5% threshold considered neutral. The lack of appetite for long positions likely reflects the $270 million in forced withdrawals that occurred between Tuesday and Wednesday, after Bitcoin lost support at $107,000. Buyers may need further confirmation that the economy is indeed entering a recession before resetting the market.
The US Federal Aviation Administration was forced to scale back domestic operations, leading airlines to cancel more than 5,000 flights, according on Yahoo Finance. Some air traffic controllers, who had not been paid for nearly a month, stopped reporting for duty. Despite Sunday’s unusual session in the US Senate, there is still no certainty that the standoff will be resolved. A breakthrough in Government shutdown may boost optimism among Bitcoin traders.
The United States Supreme Court has questioned President Donald Trump’s authority to set certain import duties. The uncertainty surrounding both the duration of the ongoing government shutdown and the maintenance of Additional import tariffs Adds another layer of risk.
Bitcoin mirrors broader market anxiety over weakness in the US economy
While the short-term economic consequences remain unclear, the overall effect has so far been to support the fiscal budget by delaying expenditures and generating surpluses. However, Bitcoin is not immune to broader market concerns about weakness in the US economy.
The BTC options Skew (Put-Call) declined 6% on Monday, marking the edge of a neutral-to-bearish market for the first time since November. When traders expect a sharp correction, the metric usually jumps to 10% or more, as put (sell) options at a premium. What could restore traders’ confidence in a potential $120,000 rally remains uncertain, but the current setup clearly indicates skepticism.
Unlike monthly BTC futures, perpetual contracts typically stay closer to bitcoin prices because of their adjustable rate financing. These contracts are the preferred tool for retail traders, relevant to assess whether sentiment has improved following Bitcoin’s recent retest of the $106,000 level.
Under balanced conditions, the financing rate should range between 6% and 12% to reflect both risk and opportunity costs. The current 5% rate is quite unsettling, showing a clear lack of interest from retail traders even though Bitcoin tested the $100,000 support on Friday. However, this lack of demand for leveraged bullish positions should not be mistaken for straightforward sentiment.
Related: End of US Gov’t Shutdown Sparks Institutional buying, hopes of ETF’s ‘Floodgate’
Fear of excessive values In the artificial intelligence sector and weakness in consumer-oriented earnings led investors to become more risk-averse. The eventual end of the government shutdown could ease tensions and push Bitcoin above $112,000, potentially triggering a short squeeze. For now, however, betting on a bullish breakout only on the resolution of the shutdown appears overly optimistic.
This article is for general informational purposes and is not intended to be and should not be construed as legal or investment advice. The views, thoughts, and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
