The cryptocurrency market faced pressure on Thursday as Ether (ETH) led a downturn, dropping to $4,040.76 during Asian trading hours. This coincided with increasing concerns about a potential U.S. government shutdown, with betting odds on Polymarket indicating a 77% chance of a shutdown by the end of the year. Meanwhile, the probability of a shutdown by October 1 stood at 63%.
The rising odds of a shutdown come as the government faces a funding shortfall. According to reports, a lack of appropriations could lead to large-scale job cuts, prompting the White House to prepare for potential staff reductions. Without a new spending bill, the government is expected to run out of money by the end of September. To circumvent a shutdown, Congress must pass a continuing resolution or 12 full-year funding bills, requiring bipartisan support to meet the 60-vote threshold needed for approval.
The broader cryptocurrency market mirrored Ethereum’s decline. Bitcoin (BTC) decreased by over 1% to below $112,000, while other major tokens, including XRP, Solana (SOL), and Dogecoin (DOGE), experienced declines ranging from 2.6% to 3%. Solana, in particular, was poised to fall below the $200 mark as the CoinDesk 20 Index dropped 2% to 3,940 points. In contrast, futures tied to the S&P 500 and Nasdaq were trading flat to positive.
While the direct cause of the downturn in the cryptocurrency market remains unclear, the uncertainty surrounding a possible U.S. government shutdown likely contributed to the cautious sentiment. Additionally, comments from San Francisco Fed President Mary Daly supported further interest rate cuts but emphasized data dependence, which may have affected market outlooks.
The Federal Reserve had previously lowered rates by 25 basis points on September 17 and hinted at more rate cuts by the end of the year. However, leaders such as Fed Chairman Jerome Powell have since advised a careful stance. As multiple Fed officials are scheduled to deliver speeches and traders anticipate Friday’s Personal Consumption Expenditures (PCE) data, market participants are closely watching for any signs of inflation. If inflation pressures appear manageable, this could enable the Fed to implement further rate cuts, potentially boosting liquidity and market momentum for Bitcoin and other cryptocurrencies.