Progress toward resolving the US government shutdown remains limited despite increased bipartisan dialogue. Senate Majority Leader John Thune noted that “a lot more conversations” are happening across the aisle, suggesting some softening in tone compared with previous weeks. However, this has yet to yield tangible results. The Senate adjourned without voting on the House-passed continuing resolution, and no new framework for compromise has emerged. The shutdown is now expected to extend well into November, with Polymarket investors placing the probability of it persisting through November 16th at 40%, underlining widespread skepticism that an agreement will be reached soon—though the potential for a resolution by November 15th is gaining traction as a trade.
The ongoing gridlock adds another layer of uncertainty to an already complex macroeconomic backdrop. The week’s other key development came from the Federal Reserve, where the FOMC voted to lower the federal funds rate by 25 basis points to a range of 3.75-4%, while signaling an end to balance-sheet reduction from December 1st. Chair Jerome Powell stated that further cuts are “not a foregone conclusion,” which we view as forward guidance aimed at cooling market enthusiasm rather than a credible assessment of the US economy—a task made virtually impossible by the current government shutdown. We remain skeptical of these comments and continue to believe that further rate cuts in December are highly likely, given the probable economic damage stemming from the shutdown, particularly when combined with already weakening employment data.
BTC Underperforms as ETH and SOL Attract Flows
The combination of fiscal uncertainty and a more hawkish Federal Reserve has kept digital assets largely range-bound, with uneven sentiment across the market. Bitcoin was the main underperformer this week, recording outflows of $851 million as of Thursday’s close. In contrast, Ethereum and Solana attracted inflows of $133 million and $380 million, respectively, over the same period.
It appears investors took Jerome Powell’s hawkish forward guidance at face value, reducing exposure amid a perceived decline in the likelihood of a December rate cut. We expect these rate expectations to recalibrate once the government shutdown ends and delayed macroeconomic data are released, offering a clearer picture of the underlying economic damage and policy response ahead.
Why It Matters
For advisors and allocators, the divergence between Bitcoin’s outflows and the strong inflows into Ethereum and Solana underscores the importance of diversification within digital asset portfolios rather than treating crypto as a monolithic asset class. Additionally, the Fed’s challenge in assessing economic conditions during the shutdown creates an unusual information vacuum that could lead to policy missteps, either premature hawkishness or delayed easing, both of which carry significant implications for risk asset positioning. As the shutdown persists, the gap between market expectations and Fed guidance is likely to widen, creating potential opportunities for tactical repositioning once clarity emerges.
For more news, information, and strategy, visit the CoinShares Crypto ETF Hub.
Originally published on ETF Trends
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