"Devaluation" trading stimulates a rebound in risk assets, and Bitcoin prices hit a new all-time high

The "devaluation" trades triggered by the U.S. government shutdown have driven a rebound in global risk assets, with Bitcoin prices reaching a new all-time high. As political and economic uncertainties escalate, investors are shifting funds towards assets like Bitcoin and gold to hedge against the risk of dollar devaluation.

The world's largest cryptocurrency reached a peak of $125,689 during the Asian trading session on Sunday (October 5), surpassing the previous record of $124,514 set on August 14. This rise in Bitcoin is supported by the increase in U.S. stocks and inflows into Bitcoin-related exchange-traded funds.

In just this week, Bitcoin has risen by 12%, with a cumulative increase of over 30% year-to-date. Market participants have referred to the U.S. government shutdown as a catalyst for the "devaluation trades," with investors expecting this to drive funds towards "safe-haven" assets.

Geoff Kendrick, the global head of digital asset research at Standard Chartered Bank, stated, "This shutdown is significant." He noted that Bitcoin is now more correlated with traditional risk assets, and it is expected to continue rising during this period.

Analysts point out that Bitcoin's rise is also driven by institutional demand, technical factors, and seasonal influences. It is noteworthy that the market will closely monitor the progress of negotiations in Congress regarding federal funding issues, as well as the impact of the Federal Reserve's monetary policy direction on the logic of "devaluation trades." These factors will determine whether Bitcoin can maintain its current upward momentum and achieve further breakthroughs.

"Devaluation Trades" Drive Multi-Asset Gains

The broad rise in risk assets reflects concerns over "devaluation," with multiple assets reaching new highs.

In addition to Bitcoin, U.S. stocks also hit record highs on Friday, with the S&P 500 index and the Nasdaq Composite index rising by 0.5% and 0.27%, respectively. Spot gold has increased by over 2% this week, marking its seventh consecutive week of gains.

Joshua Lim, co-head of markets at cryptocurrency brokerage FalconX, stated:

"Many assets, including stocks, gold, and even collectible Pokémon cards, have reached historical highs, so it's not surprising that Bitcoin benefits from the narrative of dollar devaluation."

The U.S. government has been shut down since Wednesday, and this event has become a key factor in pushing Bitcoin prices higher. After lawmakers failed to reach an agreement on federal funding, investors turned to decentralized assets for safety.

Kendrick noted that Bitcoin's performance during this government shutdown is markedly different from the period between December 2018 and January 2019. He stated:

"During the last government shutdown under Trump, Bitcoin was in a different position and performed mediocrely. However, this year, Bitcoin has formed a trading correlation with U.S. government risk, which is best reflected in its relationship with the term premium of U.S. Treasuries."

Multiple Positive Factors Combine

The sustained rise in Bitcoin is supported by growing institutional demandUnder the friendly legislative environment created by Trump, publicly traded companies led by Michael Saylor's MicroStrategy have adopted a corporate strategy of accumulating cryptocurrencies, boosting market demand.

This strategy has spread to smaller competitors like Ethereum, driving a broad rise across the entire digital asset sector.

The inflow of funds into Bitcoin-related ETFs has provided additional momentum for price increases. These products make it easier for traditional investors to participate in Bitcoin investments, expanding the base of market participants.

In addition, Bitcoin's historical performance in October also provides technical support for the current upward trend.

This month is referred to by the market as "Uptober," with Bitcoin recording price increases in 9 out of the last 10 Octobers, reinforcing bullish sentiment among investors