The US government shutdown triggered a surge in "devaluation" trades. Investors, seeking to hedge against the risk of US dollar devaluation, shifted funds into assets like Bitcoin and gold. Bitcoin hit a high of $125,689 on Sunday, setting another all-time high. Beyond political uncertainty, institutional demand growth, Bitcoin ETF inflows, corporate Bitcoin accumulation strategies, and October seasonal factors collectively fueled the rally.

The "devaluation" trade triggered by the US government shutdown spurred a rebound in global risk assets, with the Bitcoin price reaching another record high. As political and economic uncertainties intensified, investors are turning to assets like Bitcoin and gold to hedge against US dollar devaluation risks.

The world's largest cryptocurrency reached a high of $125,689 during Asian trading hours on Sunday (October 5th), surpassing the previous record of $124,514 set on August 14th. This rise in Bitcoin was supported by gains in US stocks and inflows into Bitcoin-related exchange-traded funds.

Bitcoin alone rose 12% this week and is up more than 30% year-to-date. Market participants cited the US government shutdown event as a catalyst for "devaluation trades," with investors anticipating this would drive flows into "safe-haven" assets.

Geoff Kendrick, Head of Digital Assets Research at Standard Chartered Bank, said, "This shutdown is significant." He noted that Bitcoin now has a higher correlation with traditional risk assets and is expected to continue rising during this period.

Analysis points out that Bitcoin's rise also benefited from a combination of institutional demand, technical factors, and seasonal drivers. Notably, the market will closely watch the progress of Congressional negotiations on federal funding and the impact of the Federal Reserve's monetary policy direction on the "devaluation trade" logic. These factors will determine whether Bitcoin can sustain its current rally and achieve further breakthroughs.

"Devaluation Trade" Drives Multiple Asset Rises
Broad gains in risk assets reflect "devaluation" concerns, with multiple assets hitting new highs simultaneously.

Besides Bitcoin, US stocks also hit record highs on Friday, with the S&P 500 and Nasdaq Composite rising 0.5% and 0.27% respectively. Spot gold gained over 2% this week, marking its seventh consecutive weekly gain.

Joshua Lim, Co-Head of Markets at cryptocurrency brokerage FalconX, stated:

"With many assets, including stocks, gold, and even collectibles like Pokémon cards, hitting all-time highs, it's not surprising that Bitcoin is benefiting from the dollar devaluation narrative."

The US government began shutting down on Wednesday, an event that became a key factor driving Bitcoin's price breakthrough. Investors turned to decentralized assets for shelter after lawmakers failed to reach an agreement on federal funding.

Kendrick pointed out that Bitcoin's performance during this government shutdown is markedly different from that during the period from December 2018 to January 2019. He stated:

"During the last Trump-era shutdown, Bitcoin was in a different place and thus performed flatly. However, this year Bitcoin has become traded in relation to US government risk, which is best seen in its relationship with the US Treasury term premium."

Multiple Positive Factors Converge
Bitcoin's sustained rally is supported by growing institutional demand.

Amid a friendly legislative environment fostered under Trump, publicly listed companies, led by Michael Saylor's MicroStrategy, adopting corporate strategies of hoarding cryptocurrency have boosted market demand.

This strategy has spread to smaller competitors like Ethereum, driving broad gains across the digital asset sector.

Fund inflows into Bitcoin-related ETFs provided additional momentum for the price increase. These products make it easier for traditional investors to gain exposure to Bitcoin, broadening the base of market participants.

Furthermore, Bitcoin's historical performance in October provides technical support for the current uptrend.

This month is referred to by the market as "Uptober," with Bitcoin posting gains in 9 out of the past 10 Octobers, reinforcing investor bullish sentiment.