Crypto Roars Back: Markets Surge on U.S. Shutdown Relief and Fed Rate Cut Speculation

Crypto bulls charge as Washington gridlock eases and Powell's pivot hopes ignite risk assets.

Macro Tailwinds Fuel Rally

Digital assets caught a bid as Congress moved toward averting a government shutdown—removing a key overhang for risk markets. The rebound gained momentum after dovish Fed whispers suggested rate cuts might arrive sooner than expected.

Traders Front-Run Liquidity

Bitcoin and altcoins ripped higher as market makers positioned for what Wall Street calls 'the only trade that matters'—anticipating the Fed's liquidity spigot reopening. Never mind that last month's CPI print still hovered above target.

The Institutional Calculus

With BlackRock's ETF inflows hitting record highs and MicroStrategy adding another $500M to its war chest, the 'dumb money' FOMO seems alive and well. Just don't ask about the leverage ratios.

As always in crypto, the rally makes perfect sense—right up until it doesn't. But for now, traders will happily ride the wave of Washington's dysfunction premium and the Fed's ever-shifting dot plot.

Shutdown Relief Sparks Market Optimism

The Senate voted 60–40 to advance a funding bill, which is expected to restore federal operations by midweek.

President Donald TRUMP is set to sign the legislation once it passes the House. Analysts say the reopening could revive economic data flows and provide the Federal Reserve with the clarity needed to resume rate cuts as early as December.

Jeff May, COO at BTSE, noted that “without key data during the shutdown, the Fed had to wait. Once operations resume, policymakers will have the confidence to adjust rates more actively, potentially easing liquidity pressures across markets.”

Bitcoin Leads the Rebound as Liquidity Returns

Bitcoin rallied more than 4% in 24 hours, reclaiming the $105,000–$106,000 range, while Ethereum gained over 5%.

Other major cryptos, including XRP and BNB, also advanced, reflecting renewed risk appetite. Analysts attribute the rebound to an anticipated recovery in liquidity as government functions and Treasury flows normalize.

Peter Chan of Presto Research said, “Removing the shutdown factor opens the door to a repricing of risk assets in a favorable macro setting, looser monetary policy, fiscal incentives, and reduced uncertainty.”

Despite the bullish tone, whale movements remain in focus. On-chain data from Lookonchain revealed that early investor Owen Gunden transferred 3,549 BTC ($361 million) to Kraken, sparking speculation of continued profit-taking.

Yet analysts like “Darkfost” believe these sales represent “a healthy rotation of long-term holders,” noting that institutional demand and ETF inflows have provided sufficient liquidity to absorb large sell orders.

Fed Policy, Inflation, and Crypto’s Path Forward

The prospect of a reopened government has also fueled bets on another Federal Reserve rate cut in December, with CME data showing a 63% probability. Lower borrowing costs WOULD likely benefit both equities and digital assets.

Related Reading: Why Are Bitcoin OGs Dumping Billions Of Dollars In BTC?

While macro Optimism drives short-term gains, experts warn that lasting recovery depends on consistent liquidity and policy stability. Still, with Bitcoin’s volatility decreasing and Ethereum’s ecosystem attracting institutional deployments, analysts see the foundations for a renewed crypto bull phase heading into 2026.

Cover image from ChatGPT, BTCUSD chart from Tradingview