Last week, talks focused on ending the government shutdown in the US, which has lasted over 40 days. The resolution of the prolonged deadlock, along with the restoration of bureaucratic order, significantly eased the uncertainty and anxiety affecting global markets. The Senate's agreement on a bill that would secure government funding until January 30, 2026, created a positive atmosphere in the markets at the beginning of the week. Crypto assets also saw an upward trend in this positive atmosphere. While the government's reopening was expected to lift the obstacle to economic data flow, differing opinions on the effects of the shutdown emerged. It is thought that the US economic outlook may have weakened due to the shutdown, and this could be reflected in future data releases. The federal government, criticized for its high debt, is expected to add approximately $1.8 trillion to its current record-high $38 trillion debt. Therefore, these initially positive developments have also raised questions about the pace of economic recovery. By midweek, this optimistic outlook in crypto markets had given way to a cautious outlook. Strengthening expectations that the Fed would not cut interest rates in December, coupled with a weakening global risk appetite, led to a pullback in crypto assets. The cryptocurrency market lost an average of 8.5% of its value in the past week, falling from around $3.55 trillion to approximately $3.25 trillion. Bitcoin, which traded at $118,000 on October 1st, the day the government shutdown began, fell to $94,000 over the weekend, testing these levels for the first time since May. This was driven by the news that October employment and inflation data would not be released following the government shutdown, coupled with investors' desire to take more cautious positions. Current conditions have strengthened expectations that the Fed will leave interest rates unchanged at its final meeting of the year, leading to a significant shift in market pricing. According to CME FedWatch data, investors had previously priced a 25 basis point interest rate cut at the December meeting at 63.8 percent, but this figure had fallen to 49.6 percent by last week. This rapid shift in expectations has been one of the main factors shaping the direction of crypto assets since mid-week, creating pressure on the markets.
A notable divergence also occurred in ETFs last week. Bitcoin ETFs saw net outflows of $1.11 billion, while Ethereum ETFs saw net outflows of $728.57 million. This suggests that institutional investors are maintaining a cautious stance in these two major assets, which hold large capital. Conversely, the continued inflows into the Solana ETF demonstrate strong investor interest in alternative blockchain solutions. The Solana ETF, launched on October 28th, saw total inflows exceeding $382 million, demonstrating that risk perception has not completely disappeared and that investors continue to selectively take positions in specific areas. The XRP-focused XRPC ETF was the standout product of last week. Its $58 million volume on its first trading day alone marked the highest first-day performance among the approximately 900 ETFs launched this year. This result demonstrates that institutional interest in thematic and alternative crypto ETFs remains high.
There's only one question on everyone's mind: So, what will happen? Cryptocurrency investors are currently trying to process the effects of the US government reopening after the longest shutdown in history. The lack of strong buying demand in the market is arguably the main factor behind this decline. Bitcoin, which fell to the $95,000 level for the first time since May, raises questions about whether a crypto winter is beginning. However, not every fluctuation is a precursor to a crypto winter or bear season. I recommend that cryptocurrency investors avoid panic selling during this period, balance their investment portfolios, and avoid leveraged trading on global exchanges.
