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Trump Government Shutdown: Effects on Stock Market and Crypto Market

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Donald Trump, the president of the united states ended the government shutdown on 25th January 2019. Let's discuss the effects of Trump Government Shutdown.

Donald Trump, the president of the united states ended the government shutdown on 25th January 2019. This shutdown began on 22nd December 2018 and lasted for 35 days. Almost most of the government works were on hold during this shutdown. Now, one must argue that apart from the political impact of this Trump Government Shutdown, what could be its financial impacts. Now, when we are pointing out financial impacts, we are including two markets i.e. the stock market as well as the crypto market.

In this article, we will discuss the effects of Trump Government Shutdown on the stock market and crypto market. We will first introduce the Trump Government Shutdown and finally will point out its effect on the stock market and crypto market individually.

 

The Trump Government Shutdown:

During the campaign of the presidential election in 2016, Trump had promised to build a border wall between US and Mexico. The expected cost for this action was around $5.7 billion. Trump thought to regain this cost from Mexico. But, this negotiation was refused by the President of Mexico. Eventually, Trump passed an order to build the wall using the existing funding of the federal.

However, a appropriations bill was passed by the Senate in December 2018 and it was not having the fund for the above border wall. Trump refused to sign on this bill as he was focused to include the fund for border wall in this bill. Trump met the top leaders of the Senate on 11 Dec 2018 asking them to support a bill for this border wall having a cost of around $5.7 billion. However, the members refused.

After this declination, Trump announced to start the Government Shutdown in the sake of border security on 22 December 2018. This shutdown expired the funding of various sectors like tax collection, law and regulations etc. Around 0.8 million employees were not paid during this duration. According to a survey, this shutdown cost the US economy around $3.6 billion.

This was a short introduction to the Trump Government Shutdown. Nextly we will see the effects of this shutdown on the stock market.

 

Effect on the stock market:

Well, if seen at a broad level, shutdowns have never affected the stock market and this shutdown was also not an exception. There wasn’t any major impact of the shutdown on the stock market. The global stock market has risen as well as fallen during the shutdown. During the shutdown, the market fell but for a very short period, around 10-15 days and having no major impact at a global level. During this Trump Government Shutdown, the MSCI World and Asia index have risen 8.1 and 4.2% respectively. The S&P 500 has risen to around 9.3%. So, there is a mix impact on the stock market during the shutdown.

Now let us focus on effects on the stock market after this shutdown. The shutdown has always lead the stock market to rise tremendously after a time gap of 3 months to 1 year after the shutdown. So, it is expected that the stock market will without any doubt, rise significantly after around 3 months of this shutdown.

Now, after the effect on the stock market, let us have a glance at the effect of the Trump Government Shutdown on the crypto market.

 

Effect on crypto market:

The shutdown may impact the crypto market in both directions as well as indirect way. If we consider the direct impact of the shutdown on the crypto market, then the delay of Bakkt comes first into our mind.

Bakkt was supposed to be launched by the ICE on 24th January 2019. However, ICE was not aware of this shutdown while announcing about the launch of Bakkt. Now, after the shutdown was announced on 22 December 2018, it delayed the launch of Bakkt. It still requires to have some important approvals from the trading commission of the country and as all such commission were off during the shutdown, the Bakkt failed to get these approvals on time and hence was not launched on 24 January 2019. Hence, the shutdown delayed the launch of Bakkt.

 

Now, let us consider the indirect impact of the shutdown on the crypto market. The price of cryptocurrencies didn’t have some much fluctuation during the shutdown. For example, on 22 December 2018, when the shutdown was announced, BTC was at $ 3882 while on 24 Dec, it was around $ 4311. While on 25 December, it fell to $3756. So, we find that the crypto market faced a mix impact of this shutdown. Someday it rose and someday it fell. So, there was a fluctuation of the impact. Overall, the shutdown doesn’t impact indirectly on the price of cryptocurrencies.

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Donald Trump policies push Mexico to Bitcoin

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Mexico has seen a new all-time high trading volume on localbitcoins. This comes out on the back of the announcement from the Trump Whitehouse.

Mexico has seen a new all-time high trading volume on localbitcoins. This comes out on the back of the announcement from the Trump Whitehouse that remittance payments of Mexican migrants in the United States of America will potentially be the target of new restrictions essentially ending the possibility of Mexican migrant workers to be able to cheaply send money back home to their families.

 

Mexico adopting Bitcoin:

Mexico has been experiencing a massive increase in the number of transactions on localbitcoins. Mexican migrant workers are believed to be exploited by the remittance companies which are charging around 10% fees. What is essentially being discussed here by the Trump Whitehouse is a new tax on these migrant workers. The number that they are currently floating around is a 3% tax on the remittances going from the USA to Mexico. This may not seem super crazy but considering the $33.4 billion which were sent to Mexico in 2018 alone, that extra 3% could mean $1 billion more per year for the United States government.

 

98% of the transactions that were sent during the last year, were sent via electronic means which means that there is actually a very strong remittance route that is ready for mass disruption going from the United States to Mexico and Bitcoin could be the perfect answer. However, the average size of a remittance payment from the United States to Mexico is $322 last year and the problem is that if the fees rise again exponentially on bitcoin, then bitcoin might not be the ideal cryptocurrency for these kinds of smaller remittance payments. Maybe we are going to see some other cryptocurrency being adopted in that situation. But regardless of which cryptocurrency is used, we can see that there is a clear need for disruption as government policies again seeks to impede or overly exploit the free float of money.

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Bitcoin Crashes Downwards: Is BTC Going to Fall Back to $4000?

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Bitcoin fell down to test the $5000 support level. If the current support around $5000 is broken, BTC might really crash to $4500 and $4200 support levels.

Bitcoin fell down to test the $5000 support level which is the most crucial level for BTC currently. The downward correction started after bitcoin tested the $5500 resistance level yesterday at around 18:00 UTC.

 

The resistance around $5500 proved very strong and pushed the price downwards sharply. The sharp declining pattern attracted a lot of sellers which even pushed the price below $5200 support level and BTC tested the $5000 support reaching up to $5018.

BTCUSD Price Chart- Coinbase

BTCUSD Price Chart- Coinbase

Bitcoin is currently trading around $5070 (at the time of publication) showcasing a bearish pattern.

 

Bitcoin Price Drop:

The sudden price drop has led to people speculating that BTC might soon crash back to the $4000 range. Earlier, analysts were also predicting the sudden rise of bitcoin to be a conspiracy. Also, Bloomberg had also called the sudden rise a Blip. If BTC had successfully crossed over the $5500 range, the next major resistance was around $5800, however, BTC fell sharply losing more than $400 in value over the last 24 hours.

 

The bearish move does not clearly indicate a crash towards $4500 and $4000 range, however, if the current major support around $5000 is broken, BTC might really crash to $4500 and $4200 support levels. With the price of bitcoin falling, other major altcoins are also in the red zone today with Ethereum falling more than 8% in the last 24 hours, XRP falling more than 6% and Litecoin falling around 12% in the last 24 hours.

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China to completely ban crypto mining: Bitcoin about to Crash Hard?

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As reported by Bloomberg, China is moving towards putting a complete ban on mining bitcoin and other crypto as it causes serious wasatage of resources.

As reported by Bloomberg, China is moving towards putting a complete ban on mining cryptocurrencies such as bitcoin. In accordance to a document posted by the National Department and Reform Commission of China, the mining of cryptocurrencies should be completely banned as it causes serious wasatage of resources.

 

China is known to be the largest hub of cryptocurrency mining with huge mining rigs been set up in the country. Earlier, China has also banned small investors to invest in security token offerings or STOs and only large investors with more than $1 million funds are allowed to invest in such projects. Now, the country is planning to take strict action against cryptocurrency miners in the country.

 

Cryptocurrency miners were earlier attracted to China due to their cheap electricity rates and subsidies in the country, however, due to the strict actions being taken by the government with the guidelines of the NDRC which has disincentivized cryptocurrency mining, a lot of miners have shut down their operations or moved to other nations.

 

Largest Mining Pools in China:

China has been a hub for some of the largest cryptocurrency mining polls. Even though the mining pools have been shifting to other countries, there has been some effect of the ban on the market for bitcoin and other cryptocurrencies as the mining is a major part of the overall working of cryptocurrencies.

 

How do you think the complete ban on cryptocurrency mining in China will effect the bitcoin price? Tell us in the comments section below.

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