At midnight on Dec 22, 2018, the U.S. Government entered a partial shutdown because President Donald Trump did not receive the $5 billion he wanted to build a wall on the Mexican-American border.
The effect the shutdown will have on cryptocurrencies, if any, is uncertain.
Cryptocurrencies, like Bitcoin, are extra-governmental. This means that they are beyond the power of governments. While they may be banned, regulated, or otherwise monitored by national governments and the laws that they pass, true cryptocurrencies are owned by the people who use them. When the government shuts down, cryptocurrencies are not directly affected.
Fake News About Direct Effects by CCN
Some cryptocurrency news sites, including CCN, have reported that the forthcoming crypto trading platform Bakkt may not receive approval from the U.S. Commodity Futures Trading Commission (CFTC) to launch on January 24 as scheduled.
This may very well be true. During the shutdown, a limited number of CFTC workers will be forced to continue working without pay (though they may be paid at some later time when the government reopens). With the limited number of employees, it is possible that the agency will focus on more important issues than approving Bakkt for release.
Calling this possible postponement a direct effect on cryptocurrency is not only an over-exaggeration, but it is also fake news.
First, Bakkt is not a cryptocurrency. It is a cryptocurrency trading platform. Thus, its postponed release is indirectly connected to cryptocurrency. Second, the effects of its release or postponement on cryptocurrency, if any at all, are undetermined. After all, there are many other cryptocurrency platforms that are functioning without approval from the U.S. government right now — and they have been unaffected by the government shutdown.
Indirect Effects?
Indirect effects, however, are much harder to determine. This is the third time the U.S. government has shutdown this year and the price fluctuations of Bitcoin and other cryptocurrencies during the first and third are inversely related while the second shutdown was too short for any conclusions to be drawn.
The January Shutdown
The first shutdown began at midnight on January 20 and ended 60 hours later. During this period, Bitcoin suffered overall losses opening at $12,283 on the Bitfinex exchange at 12:00 A.M. on January 20 and opened at $10,462 at noon on January 22 when the government reopened.
But there is no way to correlate the shutdown with these losses. After all, the shutdown also began the first day Donald Trump took the presidency, which may have impacted the cryptocurrency market indirectly. Furthermore, this loss marked the beginning of steady losses seen over the last year following the cryptocurrency boon of late 2017 and early 2018.
The Current Shutdown
To make things more difficult, Bitcoin and other cryptocurrencies have been increasing in value the past week. On December 22, BTC opened at $3,882.80 at 12:00 A.M. EST on Bitfinex, when the government officially shut down. At 10:00 P.M. on December 23, it opened at $4,311.60.
But overall increases in value did not begin at midnight on December 22. They began several days prior. Correlating these gains to the current government shutdown is, thus, not possible nor even reasonable.
The Overnight Shutdown in February
Furthermore, the second shutdown occurred during a single night in February. Changes in overall cryptocurrency prices on that night and subsequent days may be correlated to the shutdown, but there’s no way to know for certain.
It is all just speculation at this point. There is not enough data to generate a causal link between government shutdowns and the price of cryptocurrencies, or any other factors for the matter.
Conclusion
In short, while some cryptocurrency news sites are making claims about direct effects, they are stretching the truth beyond what is reasonable, or even ethical. They are presenting possible indirect effects based on speculation as something other than what they really are.
The simple truth is that we do not know exactly what effect a government shutdown has on cryptocurrency. During the January shutdown, prices fell. Since this shutdown began, prices have risen. And the shutdown in February was too brief to help us draw any conclusions.
Perhaps when the government reopens, there will be more data available to help us understand the effects of U.S. government shutdowns on cryptocurrency and its price fluctuations. But until then, it is all just speculation, no matter what the other news outlets want to tell you.
Do you think the government shutdown will have an effect on cryptocurrency prices? If so, what might the effects be?
Images courtesy of Shutterstock, TradingView.
As a trusted news outlet in the blockchain and cryptocurrency industry, BeInCrypto always strives for the highest journalistic standards and adheres to a strict set of editorial policies. BeInCrypto is an independent website with authors and management that may personally invest in cryptocurrencies or blockchain startups.
