Key Takeaways
Will the shutdown affect crypto?
Yes, especially altcoins could be affected more than BTC.
What’s the market outlook for Q4?
Short-term caution could extend into early Q4, but in the mid-term, traders were positive.
The markets have priced in a likely U.S. government shutdown by the 1st of October. Bitcoin [BTC] and the rest of the crypto markets, alongside U.S. equities, printed weekly lows on the 25th of September.
Interestingly, the chance of such a shutdown (Congress’s failure to set funding plans for government operations) increased by 10% to 70%.
A Forbes report said it could extend for a week if Congress doesn’t act quickly.
If the projection proves accurate, it could worsen market sentiment and pull BTC, XRP, and other major assets further down the charts.
But how are traders positioning themselves for next week and the rest of Q4?
Assessing Options market insights
Bitcoin’s 25-Delta Skew (call-put) dropped by 8% for 1-week (blue) and 1-month (purple) tenors.
This meant increased short-term hedging, or a greater demand for put options (bearish bets) over calls (bullish bets). In other words, there was a bit of caution in the near term as we head into Q4.
Source: BTC 25-Delta Skew (Velo)
But the 25 Delta Skew for the 3-month tenor was flat near 8% and didn’t react explosively to the current macro uncertainty.
Put differently, Options traders had a positive outlook (more demand for calls, bullish bets) for the market in the mid-term (broader Q4)
For XRP, however, the market sentiment was neutral to negative across all tenors. This could be a warning sign for altcoin traders, especially if BTC dominance climbs higher into Q4.
Source: Laevitas
As of press time, BTC dominance has recovered about 4% towards 60% and could stall altcoin momentum if the trend continues.
Besides, it remains to be seen whether the much-awaited altcoin ETF approvals in October will be a ‘sell-the-news’ event.
That being said, BTC was in a great position despite the current pullback. The apparent demand, which tracks appetite from ETF and crypto treasuries, surged in September and appeared stagnant, but did not drop.
Source: CryptoQuant
If the demand picks pace in Q4, it could spark a strong recovery. But any decrease in institutional demand, like seen in Q1 (red bars), could drag BTC lower on the price charts.
Overall, there was short-term caution across BTC and altcoins. However, the outlook was more positive for BTC than altcoins in the mid-term. Meanwhile, BTC was valued at $109K while XRP traded at $2.7 at the time of writing.