This article is reprinted with permission from Phyrex_Ni, and the copyright belongs to the original author.
In the past week, the most critical development has been the glimmer of hope for an end to the U.S. government shutdown. The documents to end the shutdown are currently in the House of Representatives. Although there are still some disputes among House Democrats, the House is primarily Republican territory. As long as the Republicans maintain basic unity, the passage of this document should not be too difficult. According to prediction data from Kalshi, more bettors believe that the end of the government shutdown will occur before 11 PM Beijing time on November 14. More importantly, based on the voting situation in the Senate, bipartisan support has already formed, indicating that this time the end of the shutdown is not just a political gesture but has truly entered the procedural advancement stage.
Once the House completes the vote, and Trump has clearly expressed support for ending the shutdown as soon as possible, the government departments that have been dormant for over forty days will fully resume operations. Federal employee back pay, contractor payments, and various public services will all be restored simultaneously. This will release a portion of suppressed financial liquidity in a short time, which is crucial for market sentiment recovery. To be honest, it feels like everyone from top to bottom wants to get things done before Thanksgiving and the end of the fiscal year, and the market has begun to trade in anticipation of this, with risk appetite slowly warming up.
Recently, I have seen many investors questioning whether the expectations of the shutdown have already been priced in, and the market has begun to overreact to the positive expectations, turning it into a negative, especially with the drop in $BTC on Tuesday, leading some investors to believe this is another "Sell The News" phase. However, I have a slightly different perspective because the end of the shutdown will have a tangible positive impact on liquidity, which includes:
First, the moment fiscal spending is restarted is a real "immediate stimulus" of cash.
During the shutdown, the U.S. federal government suspended or delayed tens of billions in wages, contract payments, research budgets, and welfare expenditures. These are not "canceled" but "accumulated." Once operations resume, this money will flood into the real economy in the short term, from the back pay of federal employees to contractor payments and the restart of welfare programs, all of which will immediately create cash flow and consumption. This is not just an expectation; it is liquidity that will actually arrive.
In simpler terms, when the shutdown ends, the government will immediately start disbursing funds, whether to suppliers or individuals, ultimately compensating for the purchasing power lost over the past forty-three days. This money is likely to directly inject liquidity into the market in the short term because all delayed expenditures are necessary, not optional. Federal employees receiving back pay will not save it; they have already been pressed for rent, loans, and daily expenses. Contractors receiving payments will not sit idle; they have already covered cash flow and owe their supply chains. Welfare program resumption will also be immediately spent by low-income groups.
In other words, this money will not slowly trickle into the economy but will rapidly return to the real economic system in a "concentrated release," creating a surge in purchasing power in the short term. For the market, this is equivalent to a small fiscal stimulus, with consumer recovery, corporate cash flow repair, alleviated bank pressure, and decreased short-term dollar demand, all leading to a noticeable increase in the speed of the entire financial chain. Therefore, the end of the shutdown is not just "good news"; it represents a tangible injection of liquidity that has been accumulating for 43 days, which is why ending the shutdown is essentially a real increase in liquidity.
Second, the TGA and the Treasury's bond issuance pace will show marginal easing, resulting in a net release of short-term liquidity.
During the shutdown, the Treasury was forced to cut back on some operations, and the TGA passively declined, releasing liquidity from the government to the market. After the shutdown ends, although the Treasury will gradually replenish the TGA, it will typically adopt a more moderate pace and prioritize restoring necessary government expenditures. Spending will come first, and replenishment will be postponed, effectively expanding net fiscal injections in the short term, which is particularly beneficial for the dollar system and short-term funding.
To clarify, during the shutdown, the Treasury had no money to spend and could only use cash from the treasury, which effectively squeezed money from government accounts into the market. After the shutdown ends, although the Treasury will need to replenish this money, it will not drain the market all at once. Instead, it will first activate all government expenditures and then slowly replenish. This will result in a net injection into the market.
Third, the disappearance of tail risks and the improvement of risk appetite will inherently lead to an increase in "shadow liquidity."
The shutdown signifies a failure of political function, amplifying rating risks, institutional concerns, and investment freezes, which increases dollar demand and pushes funds toward conservatism. Once the shutdown ends, these tail risks will be suppressed, and the behavior of banks, companies, and institutions will change immediately—financing will resume, bond issuance will restart, approvals will return, and leverage will be restored, all of which will increase the speed of real liquidity and shadow liquidity. An improved risk appetite will inherently reactivate liquidity.
In simple terms, as soon as the government shuts down, the entire market automatically enters a defensive mode. Banks will reduce lending, companies will hesitate to issue bonds, cross-border capital will slow down, and even internal approvals at large institutions will freeze because no one wants to take on additional risks in a context where "the U.S. government is not functioning normally." In this environment, dollar demand will suddenly rise, with everyone scrambling for liquidity, dollars, and short-term safe assets, ultimately leading to a slowdown in the market's capital turnover speed, even if the Federal Reserve does not raise interest rates, financial conditions will be passively tightened.
Once the shutdown ends, tail risks will be immediately eliminated, and risk behavior will switch back from "defensive" to "normal." Banks will restore normal lending limits, corporate bond issuance will instantly unfreeze, funds will be able to re-approve investment projects, insurance capital will be reallocated, and cross-border capital will return to normal reporting rhythms. The market will no longer need to hoard dollars as a safety net. Overall, the end of the shutdown brings a decrease in risk premiums, which in turn stimulates an improvement in the financing environment, leading to more capital flow, thus increasing the speed of liquidity in the real economy and financial markets.
Therefore, I do not believe the market has fully priced in this situation, nor do I think the end of the shutdown is merely a short-term "Sell The News." On the contrary, I am more inclined to view this as a transition from "expectation improvement" to "real liquidity entering the market." Short-term fluctuations do not affect the long-term trend; the real stimulus will come from the capital inflow and the resumption of government activities after the shutdown ends, which will gradually reflect in the market over the coming weeks.
This is the true benefit for risk markets because it does not rely on sentiment or narrative but is constituted by substantial improvements from three real "liquidity sources": government spending, TGA operational pace, and institutional risk appetite. Thus, the end of the shutdown does not bring a one-time benefit but rather a sustained fiscal repair period lasting several weeks or even months. During this time, the funds that were previously suppressed will re-enter the economic cycle, frozen financing activities will return to normal, and the previously tight short-term liquidity will significantly ease.
This structural improvement will make the underlying funding environment of the market healthier and provide more solid support for risk assets. Therefore, what the market is currently seeing is just the first step; the real capital effects have not yet fully manifested. As government spending fully activates, various debts return, bond issuance progresses steadily, and tail risks disappear, the performance of risk markets in the coming weeks is more likely to shift from "emotion-driven" to "liquidity-driven." This is a trend worth paying attention to and represents the core value of the end of this shutdown for the entire market.
After the shutdown ends, as liquidity gradually recovers and various data are re-released, the market's focus will inevitably return to the Federal Reserve's monetary policy. However, before monetary policy, there is another event that will provide dual support for sentiment and market liquidity: Trump's tariffs, which are currently awaiting a final ruling from the Supreme Court. According to prediction data from Kalshi, the probability of the Supreme Court supporting Trump's tariffs is only 24%, which indicates that unless the Trump administration finds another excuse to impose taxes, this tax drama that has lasted nearly a year is likely to be deemed invalid.
So, if it is indeed ruled invalid, and Trump does not have better tax tools, will this be a positive or negative for the market?
In fact, Trump's global tariff plan creates significant uncertainty for supply chains, import costs, corporate profits, and inflation paths. The market has viewed this as a risk for a long time, requiring companies to raise cost expectations, prompting investors to reassess profitability, increasing risk aversion, and locking liquidity back up.
Conversely, if the Supreme Court rules the tariffs illegal or significantly limits their scope, the market's sentiment will react completely oppositely: supply chain risks will ease, cost expectations will decline, inflation pressure will lessen, and corporate profits will improve. This would open a window for the economy from both the fiscal and supply sides, providing a significant boost to risk markets.
Thus, tariffs are essentially an invisible tax burden. Overturning tariffs can quickly release liquidity, alleviate inflation pressure, and reduce geopolitical trade frictions. The ultimate result is that companies can more quickly restore normal cost structures, consumers face reduced price pressures, global supply chain expectations stabilize, and the overall market's risk premium is significantly lowered. When costs are no longer pushed up by tariffs and inflation pressure begins to ease, the Federal Reserve's monetary policy space will expand, eliminating the need to maintain tightness due to structural inflation caused by tariffs, laying the groundwork for future interest rate cuts and even liquidity easing.
In other words, if tariffs are overturned, the market will welcome long-term positive resonance from three main lines: improved corporate profits, reduced production costs, and eliminated uncertainty. Inflation pressure will ease, no longer driven up by tariffs. Policy space will expand, allowing the Federal Reserve to avoid struggling between forced anti-inflation measures and recession concerns. This will clear risk factors from the source for risk markets, enhancing sentiment and releasing real funds, even allowing safe-haven funds to flow back into sectors like technology stocks and crypto assets.
If the end of the shutdown addresses "fiscal liquidity," then resolving the tariff issue addresses "structural risk premiums." The combination of both is undoubtedly a strong positive for risk assets.
Of course, this is our rational perspective. From Trump's point of view, the implementation of tariffs not only alleviates fiscal pressure but also serves as a politically advantageous tool that can achieve multiple objectives.
First, tariffs can directly increase fiscal revenue on paper. Even if the scale is not large, it can provide a simple and crude source of cash amid budget reviews, deficit negotiations, and the Treasury's immense pressure.
Second, the existence of tariffs can demonstrate a "tough stance" domestically, especially when facing manufacturing states, blue-collar voters, and issues of industry relocation. Tariffs are the easiest policy to understand, the most intuitive, and the most promotable.
Third, tariffs can also serve as leverage on the trade negotiation table, maintaining pressure in international negotiations, acting as both a tool for exerting pressure and a bargaining chip.
From Trump's political logic, tariffs are essentially the lowest-cost, fastest, and most narrative-driven policy weapon. They do not require congressional authorization, do not need to wait for systemic reforms, and do not require complex designs, allowing for almost immediate visible political effects. Because of this, even if the Supreme Court overturns the current global tariff scheme, Trump may continue to seek other forms of "alternative tariffs" or "administrative fees," as tariffs represent a stance, a form of control, and a symbol of reshaping supply chain discourse.
But this is precisely the biggest contradiction between market and political logic. For the market, tariffs are costs, inflation, and uncertainty; for Trump, tariffs are tools, bargaining chips, and political gains. This is why the Supreme Court's ruling is particularly critical. It will determine not just a tax but the trajectory of the U.S. economy, trade policy, and inflation over the next few years. If tariffs are restricted, the market will likely breathe a sigh of relief. If tariffs continue to advance, although it scores political points, the economic side will have to bear higher costs and volatility.
Although Trump claims that if tariffs are implemented, they could provide $2,000 to Americans excluding high-income earners, this sounds more like a political narrative rather than a feasible fiscal policy. First, the president does not have the authority to distribute money nationwide; it is Congress that truly decides whether to distribute funds, and Congress is currently in a highly divided state, making it impossible for Democrats to support a large-scale cash distribution plan reliant on tariff revenue.
Second, the fiscal revenue generated by tariffs is far from sufficient to support such a level of universal subsidy, especially in a scenario where import volumes may decline due to tariffs and supply chains adjust, resulting in actual tax revenues being lower than advertised figures.
More critically, tariffs essentially tax American consumers. Even if money is nominally distributed to low- and middle-income groups, it is in exchange for higher prices on goods. For ordinary Americans, this does not mean they earn $2,000; rather, they will have to pay more for imported products for a period of time. In the long run, tariffs will drive up inflation, compress real purchasing power, reduce corporate profits, and hinder investment and employment, which is not comparable to a one-time subsidy.
Therefore, the $2,000 promised by Trump is more of a political strategy than a policy that can truly be implemented and sustained. While many people imagine that distributing money could stimulate the economy like the large-scale monetary easing in 2021, in reality, even if tariffs are implemented, this portion of funds may not be accessible. Even if it is received, facing higher prices, it may only be a drop in the bucket.
Next is the on-chain data section.
The stock of exchanges remains a key focus for me. From the overall exchange stock in the past week, the changes are not significant; however, there is still a trend of more Bitcoin being withdrawn from exchanges. This is because the main market speculation has shifted from concerns about the shutdown to expectations of its end. Investors generally believe that there will be a rebound in the market after the shutdown ends, so after the expectation of the shutdown ending was announced, panic emotions decreased, leading to a natural decline in turnover. Investor sentiment for bottom-fishing has appropriately increased. Even though there was some price correction on Tuesday, the decline in exchange stock can still be observed.
Extending the timeframe to a year, it can also be seen that the overall exchange stock has been slowly declining over the past two weeks. The stock and BTC price are inversely related, and there has not been large-scale selling pressure in the market, while chips continue to be withdrawn from exchanges. This means that the recent decline has not triggered panic selling; instead, funds are continuously accumulating during the downturn. This indicates two things:
First, short-term price fluctuations are not the true behavior of large on-chain funds but are more likely due to derivative leverage liquidations, emotional fluctuations, or passive reductions in positions. Most investors have not chosen to transfer BTC to exchanges in preparation for selling; rather, they continue to buy from exchanges and are not sensitive to short-term price fluctuations.
Second, spot demand remains stronger than selling pressure, especially the trend of accumulation by institutions and large addresses is more evident. Over the past two weeks, BTC has experienced several rapid dips, but the exchange stock has decreased instead, indicating that investors are buying low-position chips with each fluctuation. The weakness in price is more due to weak liquidity rather than increased selling. It feels to me that chips are becoming scarcer, true sellers are decreasing, and true buyers are becoming more patient.
Of course, this part of the exchange withdrawals and the increase in purchasing power does not seem to be provided by traditional investors. From the data on BTC and ETH spot ETFs, it can be seen that in the past week, traditional investors not only did not buy but also increased their selling pressure. The liquidity loss caused by the shutdown is sharply reflected in the cryptocurrency sector. Of course, U.S. stocks have not fared much better, as they also faced selling during this period, with more funds flowing into safe-haven assets like the dollar and U.S. Treasuries. This situation is likely to change with the end of the shutdown. I have mentioned this many times before, so I won't elaborate further.
From the data of long-term holders who have never missed a position for over a year, it is still in a distribution state rather than an accumulation state. If this data does not fail this time, it indicates that BTC's price still has the potential to rise, and the distribution by long-term holders is likely the reason for the decrease in exchange stock. Investors are buying more than they are selling, continuously obtaining BTC from exchanges and withdrawing it, thus the distribution by long-term holders can currently be equated to the decrease in exchange stock.
Next is the data on BTC and ETH open contracts. The data clearly shows that BTC and ETH leverage are gradually attempting to increase again. Historically, price increases are often accompanied by increased leverage. However, currently, both BTC and ETH funding rates are positive, indicating that bullish sentiment still dominates the market, with long positions being more aggressive than short positions. The overall direction of leverage is leaning towards the long side. A positive funding rate means that bulls are willing to pay a premium for holding positions, which usually occurs during phases when the market expects prices to continue rising, indicating that sentiment remains optimistic.
However, it is important to note that when leverage increases and positive funding rates occur simultaneously, structural risks in the market are also accumulating. Short-term price fluctuations may be amplified because if prices experience a rapid decline, it will trigger a chain reaction of deleveraging. However, from the current data, the overall leverage level is still far below the mid-year peak, meaning that this round of leverage expansion appears to be a gentle test rather than a full-blown overheating. On the spot side, BTC continues to flow out of exchanges, and the chips of long-term holders have not shown significant loosening, indicating that the increase in leverage is not driven by panic buying but is likely the market waiting for macro liquidity recovery to make early arrangements.
Next is the change in BTC holding distribution over the past month. The data clearly shows that high-net-worth investors holding more than 10 BTC remain the main buyers. Whether prices rise or fall, high-net-worth investors are primarily buying, while small-scale investors holding less than 10 BTC are more sensitive to price changes, especially when prices fall, small-scale investors tend to sell more. More BTC continues to flow to high-net-worth investors.
Finally, regarding the URPD data, although the price has currently fallen below the support level of $104,500, the overall support structure has not been broken. The chip structure between $104,500 and $111,000 is also very stable, and there are no signs of panic selling, even among loss-making investors, their positions have not collapsed. Therefore, even if the price temporarily falls below the support level, it can easily return to the support position. From the chip structure, there does not appear to be significant systemic risk at this time.
Overall, the current sentiment remains optimistic. On one hand, the U.S. government shutdown is likely to end on Wednesday U.S. time, leading to a recovery in liquidity. On the other hand, the U.S. Supreme Court may not support Trump's tariff policy. If Trump is forced to abandon or reduce some tariffs, it will also lower the risks of consumption and inflation for the market, allowing the Federal Reserve to focus more on interest rate cuts.
However, from CME data, expectations for a Fed rate cut in December have decreased from 74% last week to 68% this week. However, from Kalshi's data, expectations for a December rate cut have not only not decreased but have actually increased. It is likely that the recent frequent reports of layoffs and labor market downturns have led some investors to believe that employment data will reach the Fed's threshold, thus pushing for a rate cut.
Additionally, early Tuesday morning, Bessenet announced the staking of spot ETFs, opening up staking channels for ETH and SOL spot ETFs, and clarified that staking does not require tax payments, granting it legitimacy. However, this staking is not a positive for on-chain DeFi protocols; rather, it is a negative. After all, staking is more aimed at compliant institutions, while on-chain, due to the lack of KYC and AML, it is difficult to accommodate this portion of staking, which may instead be shared by more compliant institutions.
Related: Cryptocurrency Weekend Plummets, Bitcoin (BTC) Temporarily Erases 2025 Gains
Original article: “End of the Shutdown, Tariff Easing Imminent: Three Liquidity Reflow Signals are Repricing the Crypto Market”
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