The US government reopens, and the market moves—reading the scenario of Bitcoin's rebound

Liquidity Vacuum Suppressed Cryptocurrency for 40 Days

The unprecedented government shutdown over the past 40 days has pushed the cryptocurrency market into a concentrated firestorm. Bitcoin broke through the $100,000 resistance level and fell below $99,000, while Ethereum also plummeted to $3,000. It was not just a simple price decline but a vicious cycle of chain liquidations. In one position on the HTX exchange, $47.87 million evaporated in an instant, and across the entire network, it was recorded as the largest liquidation in history.

On the surface, it appears to be a political fight, but in reality, it was the blood of the financial system—the liquidity—being drained from the market. Since October 1, as budget negotiations faltered, the conflict between the Republican Party, which failed to secure the necessary 60 votes in the Senate, and the Democratic Party, which was at odds over healthcare spending, froze the market.

When government accounts drained $200 billion

The key is the TGA( Treasury General Account). This account can be understood as the central expenditure account of the U.S. government. Money flows in through taxes and Treasury bond issuance, and out through salaries of civil servants, defense spending, and more. During normal times, money circulates continuously, filling bank reserves and supplying liquidity to the market.

However, problems arose when the shutdown began. Money kept coming in, but there was nowhere for it to go out. Since Congress did not approve the budget, government agencies closed, and the Treasury could not carry out planned expenditures. As a result, the TGA became a ‘black hole’ of incoming funds.

Between October 10 and 30, just 20 days, the balance surged from $800 billion to over $1 trillion. Over $200 billion was trapped in the Federal Reserve’s vaults. According to analysis by The Wall Street Journal, this had the same impact as removing over $700 billion in cash from the market.

Interbank borrowing costs skyrocket

Liquidity shortages first appear in the most sensitive indicators. The SOFR( Secured Overnight Financing Rate), the interest rate for overnight bank borrowing, soared to 4.22% on October 31. It broke through the Federal Reserve’s set benchmark rate of 4.00% and is moving at a level 32 basis points above it. This is the highest since the pandemic crisis in 2020.

The SRF( Standing Repo Facility) usage, which shows how severely the banking system is short of dollars, also spiked. It is the last emergency outlet for banks to borrow cash using high-grade bonds as collateral, and its usage reached $50.35 billion, the highest since the pandemic.

Long-term holders also gave up

Old players on the chain have all fled. Over the past 30 days, wallets of so-called 'Long-Term Holders( (LTH)), who held Bitcoin for more than 155 days, dumped a total of 405,000 Bitcoins. This amount accounts for 2% of the circulating supply and was liquidated within a month. Based on an average of $105,000 per Bitcoin, this is over $42 billion.

The spot ETF market also exited. BlackRock’s IBIT saw $715 million flow out between October 29 and November 3, over four trading days, which is more than half of the total $1.34 billion outflow from all U.S. Bitcoin ETFs. On October 31 alone, $149 million was withdrawn, setting a daily record.

Where to find signs of recovery

Although government funding support legislation has not yet been fully implemented, the market is already responding. During Asian futures hours, U.S. stock index futures surged significantly.

The most important tracking indicator remains the flow of the TGA. Once the shutdown ends, the Treasury will resume government spending, and the funds accumulated in the TGA will flow into the market. This will help fill bank reserves and breathe oxygen into the financial system.

Watching the SOFR return to normal levels is also crucial. If it drops from the current 4% to below 3%, it signals that interbank funding tensions are easing. A significant decrease in SRF usage also indicates that the Federal Reserve’s emergency window is being used less, suggesting liquidity is recovering.

The pace of Treasury bond issuance and the RRP( Reverse Repurchase Agreement) balance are also important. When a combination of ‘massive bond issuance + sharp RRP reduction’ appears, it indicates liquidity is moving from money market funds into safe assets, which could be negative for risk assets like Bitcoin.

Procedures still remain

The Senate has passed the budget bill, but several steps remain before full implementation: House vote, presidential signature, and actual enforcement. Each amendment triggers a 30-hour debate period, and if Democrats choose to delay, further postponements could occur.

Optimistically, the entire process could be completed tonight, allowing the government to reopen tomorrow night. A more conservative scenario might take several days to a week. Any delay means the “re-shutdown risk” has not been fully eliminated.

This period of uncertainty could actually be the final “boarding phase” for cryptocurrencies. When the government reopens and liquidity flows back in, the pent-up demand and fragile sentiment recovery could trigger a slight rebound. However, given the current political uncertainty and technical weakness, it is essential to continue monitoring procedural developments and TGA flows to interpret market signals.