Bitcoin’s price rallied last week, climbing 12.14% and erasing the losses from a lackluster September. While altcoins largely drove major rallies from July to September, this time the bull run was led by Bitcoin.
Over the same period, major altcoins like Ethereum (ETH) and Solana (SOL) saw more modest gains of 12.90% and 13.24%, respectively.
Bull’s Reasons: Shutdowns, Jobs, and the Fed
The key factor in last week’s rally was the US government shutdown, which began at midnight EST on Wednesday. During a shutdown, US government employees stop working, and the government cannot use its budget. This includes federal employee salaries and other government expenditures.
Market participants saw this situation as a significant source of economic uncertainty, believing it would push the Federal Reserve to cut interest rates at its upcoming FOMC meeting in late October.
According to CME Group’s FedWatch Tool, the probability of a US interest rate cut in October was around 89% on September 30. However, after the government shutdown was confirmed late that afternoon, the probability surged to 98%. At that moment, Bitcoin, which had been trading around the $112,000 level, began its rapid ascent.
Weak jobs data also fueled Bitcoin’s bull run. On Wednesday, the US ADP Employment Report for September came in at -32,000, falling well short of the market’s forecast of +50,000. This data supports the view that the US labor market is downturned.
According to FedWatch, the market is now pricing four additional rate cuts by June next year. Since the shutdown began, the US Republican Party has stated that it will lay off additional federal employees during this period.
The move is seen as an attempt to complete the federal employee cuts that President Donald Trump failed to achieve during his administration. If this attempt succeeds, the US unemployment rate, currently at 4.3%, could rise significantly. With non-farm payrolls already weakening, a rise in unemployment could force the Fed to pursue additional rate cuts.
Japanese Politics Also Plays a Role
On Friday, Sanae Takaichi was elected president of Japan’s Liberal Democratic Party and will likely become prime minister. She is expected to initiate policies that will weaken the yen.
While her predecessor, Fumio Kishida, had been considering raising interest rates to combat inflation, Takaichi’s policies are expected to lead to an easing of monetary policy. Against this backdrop, Bitcoin’s price briefly surged past $125,500 over the weekend, setting a new all-time high.
