The US government shutdown has pushed both Bitcoin and gold to record highs, as politicians fail to resolve a budget dispute, with some analysts predicting the world’s most popular digital currency could reach as high as $200 000 (R3.45 million) by year-end.
Charts tracking the crypto-currency show that, at this morning's exchange rate of R17.26, one Bitcoin is worth over R2.1 million, having broken through the $125 000 mark yesterday.
Over a 10-year period, the crypto-currency is up a staggering 31 830% – turning what would have been a R1 000 investment into over R318 000.
Due to rand volatility, the virtual coin did not surpass the previous all-time high of R2 208 million in July, Luno's data shows.
Gold is also following an upward trajectory, proving its status as a refuge during turbulent times. It has climbed 39.25% over the past decade and surged past $3,900 an ounce in early morning trade.
Why the shutdown is driving prices
The US government shutdown, triggered by a political dispute between the Democrats and Republicans over funding for healthcare subsidies and other key issues, has forced non-essential services to close and put important economic data – such as employment figures – on hold.
This data blackout makes it harder for market watchers to predict Federal Reserve interest rate decisions, adding to market uncertainty. Investors keenly watch the Fed when deciding whether to trade equities, gold, Bitcoin, the dollar, and emerging market assets.
Uncertainty about US government spending and policies has shaken investor confidence, pushing many toward alternative ways to protect their money, deVere Group, an international financial services company, notes.
deVere Group adds that Bitcoin's recent rise comes as the US dollar has weakened, dropping to its lowest levels in weeks against other major currencies.
Christo de Wit, Luno's country manager for South Africa, adds that sentiment is driven by strong inflows into US spot exchange-traded funds and mounting concerns over the prolonged US government shutdown, which is now entering its second week.
“This leads investors to hedge against US government risk – many analysts predict that if this shutdown is prolonged further, we can see more movement in the market,” says De Wit.
Concurring is Johann Els, Old Mutual's chief economist, who explains that the shift to riskier assets is the result of policy uncertainty in the US, resulting in investors taking on more risk.
“Those are the reasons why the gold price and Bitcoin have moved up so much,” adds Els.
deVere Group CEO Nigel Green notes that “Bitcoin's appeal strengthens when trust in central authority is questioned, and right now, that trust is under heavy strain”.
Regulatory tailwinds impact
Another key driver is a friendlier regulatory environment towards digital currency in the US, says deVere Group, a sentiment echoed by MarketWatch.
The rally extends a powerful upward run that has been building since the summer, driven by expanding exchange-traded fund volumes and a steady shift of capital into digital assets as traditional markets lose traction.
Green explains that Bitcoin has evolved beyond its speculative origins. “Bitcoin is no longer a speculative corner of the market; it's being treated as a legitimate macro instrument,” he says.
“Institutional capital, treasury allocations from major companies, and interest from governments are reshaping the market's depth and maturity,” Green adds.
Year-end predictions
On the back of this move to alternative assets, Green predicts that Bitcoin will continue to surge and reach $150 000 (R2.59 million) before the end of the year, supported by a weaker dollar, sustained investment from major financial institutions, and political backing from Washington.
MarketWatch is even more optimistic, predicting that Bitcoin will hit as much as $200 000 (R3.45 million) by year-end, driven by the same positive regulatory environment while also noting that the currency historically performs well in the last three months of the year.
“Interestingly enough, we generally see an uptick in volume in October – known as 'Uptober'. The asset has gained in nine of the past 10 Octobers,” says De Wit.
Other predictions from institutions such as Citigroup and JPMorgan see Bitcoin ending the year at anywhere between $133 000 (R2.29 million) and $165 000 (R2.84 million).
Els, meanwhile, believes that gold may have run its course. “I think the bulk of that uplift is behind us. In other words, if you were thinking to invest in gold, I think you've probably missed the boat,” he says.
Green says the price action reflects a deeper structural change in how investors view digital assets.
“We're in a phase where digital assets are integral to the global financial system. Bitcoin's limited supply and growing integration make it an essential hedge in a world of mounting fiscal pressure and currency depreciation. Should confidence continue, $150 000 looks increasingly achievable before the end of the year,” says Green.
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