Crypto prices are experiencing fluctuations, according to various reports. Some forecasts suggest that the temporary shutdown of the US federal government will lead to increased investor interest in crypto as a haven, leading to a rise in their prices. This is what happened with gold, which reached historic highs.
Other reports suggest that prices have calmed down and may be headed for a decline after a hot summer in which many companies rushed to buy cryptocurrencies after the US President and his administration threw their weight behind them.
A report issued today by the financial group Fast Company indicates that the prices of several cryptocurrencies have risen, while US stock futures have declined.
The report indicates that Bitcoin rose by 2.8%, reaching $116,281, while Ether rose by the same percentage, reaching $4,283.
It’s only natural for investors, especially Americans, to seek assets less correlated with traditional markets in these circumstances.
In times of political or economic uncertainty, some investors turn to so-called safe-haven assets. Historically, gold has played this role, but in recent years, crypto has begun to be considered a modern alternative.
The rise in crypto prices coincided with the moment the US government officially entered a shutdown, suggesting a direct link. However, the “shutdown,” which may be short if Democrats and Republicans agree on a funding bill, could put a stop to these gains and possibly even reverse them.
Hot summer end
In contrast, a report by the Wall Street Journal indicates that last summer’s rush to acquire cryptocurrencies may have come to an end. According to the newspaper, vaults are overflowing with these currencies after more than 200 companies rushed to store them, and Bitcoin purchases have steadily declined in recent months.
The decline in Bitcoin prices has not been limited to the decline in the price of Bitcoin, but has also extended to the shares of companies that have incorporated it into their vaults. The newspaper states that a quarter of the listed companies that adopted this strategy saw their stock values fall below their holdings of digital assets, and it has also drawn the attention of regulatory authorities.
Companies rushed to add Bitcoin and other cryptocurrencies to their financial assets after President Trump publicly declared his support for the digital asset industry.
Within a few months, dozens of companies revealed plans to shift their focus from industries such as biotechnology or agricultural equipment to Bitcoin and other cryptocurrencies.
Bankers and analysts attribute the current slowdown to a glut of shares issued by crypto vault companies in private sales to investors.
These offerings seemed to some to be a quick and efficient way to finance Bitcoin purchases, but it turns out that a large number of them adopted the same strategy at the same time.
Strategy (formerly known as MicroStrategy) was a pioneer in the shift to buying Bitcoin, but it is now facing challenges due to the oversupply.
Its shares fell 20% during the third quarter and are now trading at 1.5 times the value of its Bitcoin holdings, down from more than three times at its peak.
Bankers expect a series of other deals between financially strong companies and smaller ones could help absorb the excess stock from the market.
However, this is contingent on crypto prices not collapsing. A sharp decline in Bitcoin and other assets could force companies to sell their holdings to cover operating expenses, potentially exacerbating the selloff.
Bitcoin rose 6% during the third quarter, while Ether—the native token of the Ethereum blockchain—rose 0.68%.
Trades outside of Bitcoin continue, with companies emerging to store Ether, Solana, and AVAX tokens.
These tokens can be frozen for a specified period of time to earn a return, giving shareholders in crypto vault companies a return similar to dividends.
However, the rapid growth in the number of these companies, which have accumulated everything from Bitcoin to the memecoin Dogecoin, has led industry players to question the long-term sustainability of this strategy.
