U.S. Government Shutdown Impact on Crypto Liquidity Analyzed
Felix Pinkston Nov 09, 2025 20:49
The U.S. government shutdown has pulled significant liquidity from markets, affecting the crypto sector. A shift from narrative-driven trading to fundamentals is underway, according to HTX's latest report.
The recent U.S. government shutdown has significantly impacted liquidity across financial markets, including the cryptocurrency sector. According to HTX's latest macro report, the Treasury General Account (TGA) balance surged from approximately $800 billion to over $1 trillion, effectively removing around $200 billion from the market, tightening funding across the banking system.
Market Dynamics and Asset Performance
In this evolving landscape, Bitcoin (BTC) is increasingly being viewed as a base collateral layer, while Ethereum (ETH) continues to serve as the primary settlement hub. New capital flows are gravitating towards Layer 2 solutions, artificial intelligence (AI), robotics, and decentralized physical infrastructure networks (DePIN), among others.
The report highlights that the crypto market is currently in a structural bull phase rather than a full-market bull. Investors are now focusing on assets with verifiable cash flow and scalable technology curves, favoring efficiency and technological innovation over mere valuation plays.
Macro Economic Perspectives
HTX's analysis suggests that the current scenario is not a defensive downtrend but rather a macro hand-off phase. Following two years of post-COVID fiscal expansion, public sector liquidity is receding as private markets reclaim control over capital allocation. This shift is driving a preference for assets rooted in real technology and verifiable value.
The global crypto market cap has increased to approximately $3.37 trillion, reflecting recovery from recent lows. The Fear & Greed Index stands at 29, indicating a low risk appetite but also potential opportunities for long-term capital accumulation.
Liquidity Realignment and Sector Rotation
The report notes that the Federal Reserve's "higher for longer" interest rate stance is diminishing as inflation eases structurally. However, the liquidity withdrawal due to the U.S. government shutdown has led to pressure on high-beta cyclicals, while AI and productivity-linked technologies continue to outperform.
Bitcoin's volatility is decreasing as it evolves into a "risk-free" collateral base for the crypto sector, supported by institutional holdings and ETF inflows. Meanwhile, Ethereum remains pivotal for liquidity rotation into higher-beta ecosystems.
Emerging Opportunities in Crypto
HTX outlines several areas of interest for investors, including fast-innovating Layer 2 networks, AI and robotics, information finance (InfoFi), and memecoins. These sectors are characterized by rapid innovation, low transaction costs, and aggressive incentives. Furthermore, the report identifies presales as a key structural play with significant upside potential.
Challenges and Future Outlook
Despite the promising outlook, the crypto sector faces challenges such as regulatory uncertainty, on-chain complexity, and narrative volatility. Nonetheless, the "structural bull" remains intact, driven by tech and financial innovation cycles in sync.
As the market transitions from a single-core to a multi-core model, sector rotation is set to become the dominant strategy for generating alpha. The report concludes that the next cycle's success will hinge on mastering the loop of macro, narrative, mechanism, liquidity, and distribution.
For further insights, visit the full report on HTX.
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