Why is it said that Bitcoin can only rise when the U.S. government reopens?

With the U.S. government shutdown entering its 36th record-breaking day, the past two days have seen global financial markets plunge. The Nasdaq, Bitcoin, tech stocks, the Nikkei index, and even safe-haven assets like U.S. Treasuries and gold have not been spared. Market panic is spreading, while Washington politicians continue to bicker over the budget. Is there a connection between the government shutdown and the global market decline? The answer is beginning to surface.

This isn’t just a normal market correction; it’s a liquidity crisis triggered by the shutdown. When fiscal spending freezes, hundreds of billions of dollars are locked in the Treasury’s accounts and can’t flow into the markets, cutting off the financial system’s blood circulation.

The Culprit: The Treasury’s Black Hole

The U.S. Treasury General Account (TGA) can be understood as the government’s central checking account at the Federal Reserve. All federal revenue—taxes and bond issuance—are deposited here. All government expenditures, from paying civil servants to defense spending, are disbursed from this account. Under normal circumstances, the TGA acts as a fund transfer hub, maintaining a dynamic balance: the Treasury collects money and quickly spends it, injecting funds into the private financial system, which then become bank reserves, providing liquidity to the market.

However, the shutdown has disrupted this cycle. The Treasury continues to collect revenue through taxes and bond sales, causing the TGA balance to grow. But since Congress has not approved a budget, most government departments are closed, and the Treasury cannot disburse funds as planned. The TGA has become a black hole—receiving money but not spending it.

Since the shutdown began on October 10, 2025, the TGA balance has ballooned from around $800 billion to over $1 trillion by October 30. In just 20 days, over $200 billion has been drained from the market and locked into the Fed’s reserves.

Analysts point out that the shutdown has withdrawn nearly $700 billion in liquidity from the market within a month—comparable to multiple rate hikes or accelerated quantitative tightening by the Fed. As the Treasury’s large drain on reserves intensifies, banks’ ability and willingness to lend sharply decline, causing market funding costs to soar.

The most sensitive assets—cryptocurrencies—felt the impact first. Bitcoin plunged after the shutdown’s second day on October 11, with liquidations approaching $20 billion. Tech stocks also faltered this week, with the Nasdaq dropping 1.7% on Tuesday, and major firms like Meta and Microsoft posting significant declines after earnings reports. The global market downturn vividly reflects this invisible tightening.

Systemic Fever: The Financial System’s Symptoms

The Treasury’s black hole (TGA) is the “disease” behind the liquidity crisis, while soaring overnight borrowing rates are the system’s “fever.” The overnight repo market, where banks lend to each other short-term, is like the capillaries of the entire financial system. Its interest rate is the most real-time indicator of liquidity tightness among banks.

When liquidity is abundant, borrowing is easy and rates stay stable. But when liquidity is drained, banks face shortages and are willing to pay higher premiums to borrow overnight.

Two key indicators highlight the severity of this fever:

1. SOFR (Secured Overnight Financing Rate): On October 31, SOFR surged to 4.22%, the largest daily increase in a year. This rate exceeded the Federal Reserve’s target federal funds rate of 4.00% by 32 basis points, reaching the highest level since the March 2020 market crisis. The actual borrowing costs in the interbank market have already spiraled out of control, far surpassing the Fed’s policy rate.

2. Fed’s RRP (Reverse Repurchase Program) Usage: On October 31, the Fed’s RRP facility was used to the tune of $50.35 billion, the highest since the March 2020 pandemic crisis. The banking system is experiencing a severe dollar shortage, forcing banks to seek emergency liquidity from the Fed.

This systemic fever is transmitting stress to the real economy, igniting long-standing debt mines—most dangerously in commercial real estate and auto loans.

Emerging Crisis in Real Economy Sectors

According to data from Trepp, the default rate for U.S. office building CMBS (Commercial Mortgage-Backed Securities) reached 11.8% in October 2025—an all-time high, surpassing the 10.3% peak during the 2008 financial crisis. In just three years, this figure has skyrocketed from 1.8%, nearly tenfold.

A typical example is Bellevue’s Bravern Office Commons, once fully leased by Microsoft and valued at $605 million in 2020. Today, with Microsoft’s departure, its value has plummeted 56% to $268 million, and it’s entered default proceedings. This is the most severe commercial real estate crisis since 2008, spreading systemic risks through regional banks, REITs, and pension funds.

On the consumer side, auto loans are also sounding alarms. New car prices have soared above $50,000 on average, with subprime borrowers facing interest rates of 18-20%. Defaults are rising, with subprime auto loan delinquency rates nearing 10% by September 2025, and overall auto loan delinquencies increasing over 50% in the past 15 years. Under high interest and inflation pressures, the financial health of low-income American consumers is deteriorating rapidly.

From the invisible tightening of the TGA, system-wide fever in overnight rates, to debt defaults in commercial real estate and auto loans, a clear crisis transmission chain is emerging. The political deadlock in Washington, unexpectedly igniting the fuse, is exposing the deep-seated structural weaknesses within the U.S. economy.

Market Sentiment: What Do Traders Think?

Faced with this crisis, markets are deeply divided. Traders are at a crossroads, fiercely debating the future direction. The pessimists, represented by firms like Mott Capital Management, believe the market is facing a correction comparable to the end of 2018…