Key points to remember:
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A U.S. government shutdown resolution could trigger a short squeeze, but traders remain skeptical that it alone can support Bitcoin’s move beyond $112,000.
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Investor caution is growing as AI valuations and weak consumer earnings weigh on risk appetite, limiting conviction in Bitcoin’s rally potential.
Bitcoin (BTC) recovered to the $106,000 level on Monday as the US government shutdown appeared to be coming to an end. Analysts had warned that a prolonged halt in financing could further dampen consumption, especially after the cancellation of thousands of flights. As the tech-heavy Nasdaq index rose 1.5%, the cryptocurrency market followed suit.
Traders are currently evaluating whether Bitcoin’s latest gains can hold amid weak demand for bullish positions in BTC derivatives.
Two-month BTC futures are currently trading at a 4% premium to spot markets, which is below the 5% threshold considered neutral. The lack of appetite for leveraged long positions likely reflects the $270 million in forced liquidations that occurred on Tuesday and Wednesday, after Bitcoin lost support at $107,000. Buyers may need additional confirmation that the economy is indeed entering a recession before re-entering the market.
The U.S. Federal Aviation Administration was forced to scale back domestic operations, leading airlines to cancel more than 5,000 flights, according to Yahoo Finance. Some air traffic controllers, unpaid for almost a month, have stopped showing up for work. Despite Sunday’s unusual session in the U.S. Senate, there was still no guarantee the impasse would be resolved. A breakthrough in the government shutdown could boost optimism among Bitcoin traders.
The U.S. Supreme Court has questioned President Donald Trump’s authority to set certain import duties. Uncertainty surrounding both the duration of the current government shutdown and the viability of additional tariffs on imports adds another level of risk.
Bitcoin Reflects Broader Market Anxiety Over US Economic Weakness
Although the short-term economic consequences remain unclear, the overall effect has so far supported the fiscal budget by delaying spending and generating additional revenue. Nonetheless, Bitcoin is not immune to broader market concerns about the weak US economy.
BTC options (put-call) skewness fell to 6% on Monday, marking the edge of a neutral to bearish market for the first time in November. When traders anticipate a sharp correction, the metric typically jumps to 10% or more because put (put) options trade at a premium. What might restore traders’ confidence in a potential rally to $120,000 remains unclear, but the current setup clearly signals skepticism.
Unlike monthly BTC futures, perpetual contracts generally stay closer to Bitcoin spot prices due to their adjustable funding rate. These contracts are the preferred tool of retail traders, making it relevant to assess whether sentiment has improved following Bitcoin’s recent retest of the $106,000 level.
Under balanced conditions, the funding rate should vary between 6% and 12% to reflect both risk and opportunity costs. The current 5% rate is somewhat troubling, showing a clear lack of interest from retail traders even after Bitcoin tested $100,000 support on Friday. However, this lack of demand for leveraged bullish positions should not be confused with purely bearish sentiment.
Related: End of US government shutdown triggers institutional buying, ETFs hope
Fears of excessive valuations in the artificial intelligence sector and weak earnings at consumer-focused companies have led investors to become more risk averse. The eventual end of the government shutdown could ease tensions and push Bitcoin above $112,000, potentially triggering a short squeeze. For now, however, betting on a bullish breakout solely on the lockdown being resolved seems too optimistic.
This article is intended for general information purposes and is not intended to be and should not be considered legal or investment advice. The views, thoughts and opinions expressed herein are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.
