Transcription
Hey everyone, and thanks for jumping back into the shutdown verse. Today, we're going to talk about the US government shutdown and how it has historically affected financial markets, including Bitcoin, gold, and the S&P 500. If you guys like the content, make sure you subscribe to the channel, give the video a thumbs up, and check out the sale on Into the Cryptoverse Premium at into the cryptoverse.com.
Well, starting today, the US government has entered into another shutdown where a lot of workers are, in fact, furloughed. This is largely a unique problem that faces the United States. Most other countries in the world are not faced with shutdowns like this. Uh, they typically have plans in place to allow things to continue to be funded.
But I was looking and I was thinking, like, well, how many times have we seen government shutdowns? And what's interesting is that we've had at least, I think, 20 since 1977. And, and this website here, it's just on, um, house.gov, it shows you, you know, all the different government shutdowns that we've had, starting with the one where funding ended on September 30th, 1976, and it lasted for 10 days, and then it was restored on October 11th, 1976.
However, you should know that some of those earlier shutdowns, we did not have the same procedures followed as we have today. Right? You'll see kind of early on, a lot of those shutdown procedures were not really followed in the same way as today. But now you can see, sort of in recent years, we have sort of a script that that we follow where a lot of workers, you know, are furloughed or whatever, whatever it may be.
Um, so what I did is I took the liberty of adding up, like, or basically taking all of these dates, the the date that funding ended and the date that it was restored, and then converting it into Pinescript, the Trading View coding language. And so what I'm going to do is we're just going to go over to Trading View here, and we're going to go to indicators. We're going to go down to my own personal scripts where I have US government shutdowns, and we're going to add that onto the chart, and they are shown by the green shaded regions that you, in fact, see.
What we're going to do now is we're going to, from a very objective and unbiased perspective, all we want to know is what happened after previous government shutdowns. Right? We're not talking about seasonality in the markets. We're not talking about, um, you know, macro conditions. We're only looking at when did we have government shutdowns, and what did the market do? That's all we care about in this video.
So if you switch this to the daily time frame and you go to today, you can see that, all right, the government shutdown started, um, yesterday. Well, it started today, but funding ended yesterday. Okay. And so that's where we start the green shaded region. And you can see that so far, Bitcoin has, in fact, gone up since then.
But let's go back over to the weekly view and look at what happened historically. So in 2018, we also had a government shutdown. You can see that it started at the very end of 2018 and went into early 2019. And what you'll notice is that it didn't really affect Bitcoin a whole lot from when the government shut down. It went up a little. It went down a little, but it did not really seem to have a lasting impact. Okay. And you can see that that one lasted for over a month.
Now, it did keep Bitcoin, you know, I mean, you could argue that Bitcoin didn't really go anywhere until the government shutdown was over. Um, but it, it didn't have a very negative impact, right? I mean, from the high that was set early on in the shutdown, Bitcoin dropped about 20%. Um, but a 20% drop by Bitcoin, that's just another day, right? Like that's not, that's not that that big of a change. And also, kind of early on in the shutdown, you can see the Bitcoin actually went up, kind of like it's doing right now.
Actually, we also had a government shutdown, a shorter one in early 2018. And if you go look at the website, and sorry for switching between sort of a dark mode on Trading View and and this, which is likely blinding you on, um, on the house.gov website, but this one only lasted for a couple of days, right? It didn't really last that long. And and you can see that, you know, during that time, the weekly candle for Bitcoin was like plus 69%. Didn't really move the needle a whole lot during during that time where the government shut down.
The only other time in Bitcoin's history besides today that the government shut down was actually at a similar time in the year, which is kind of interesting, right? So, in 2013, Bitcoin also went through a government shutdown. And you can see that it nearly started around the same time. Maybe it was the exact same time. Yeah. So in 2014, um, sorry, this is 2014, um, this was the one that that that it started, well, it started September 30th, 2013, and it went through October 17th, 2013. Okay.
So what's interesting about that, I almost wonder, um, I guess they have the fiscal year is 20, 2014, but you can see it started September 30th, 2013, and lasted through October 17th. What did Bitcoin do? Well, let's go to the daily time frame because when you look at the weekly time frame, it, it, it's kind of hard to make heads or tails of what's really going on on some of the shorter time frames. So, if you look at this, you'll see that there was also a government shutdown. And Bitcoin sort of went up before the shutdown, and then the shutdown occurred, and then Bitcoin immediately dropped. Not, I mean, like not a ton. I mean, it dropped like about 20 something percent. But again, that's really familiar in a lot of bull markets, you know, 20% drops.
But what's interesting is that Bitcoin recovered from that drop and it ended at a higher price than when the shutdown began. So there was sort of a lead-up going into the shutdown where you can see, you know, Bitcoin was putting in some lower highs. It then broke through the lower highs. It then had a sell-off on October 2nd. It recovered, and by the time the shutdown was over a week or two later, Bitcoin was actually at a price 14, 15% above from where the shutdown actually began at.
So you can see that all three of the shutdowns that Bitcoin has had, you know, I mean, you could argue that while the shutdown was going on, it didn't really have a major effect. There certainly was volatility during the shutdown, but it didn't really seem to change what was already happening, right? Like in 2013, we were already in a bull market, and yeah, maybe it, it was responsible for some short-term volatility, but it didn't really seem to stop what was going on. In 2018, that's the mid, that's the sort of the the bare market years, right? Everyone knows that the midterm years for crypto historically have not been that great, and not a whole lot happened, right? I mean, it just looks like normal volatility. And then at the very end of 2018, you can see that that Bitcoin ended up finishing the shutdown a little bit lower than where it began. But after the shutdown was over, Bitcoin went down a little bit more, and then, and then started to climb.
So that's what we can see that Bitcoin has done during the shutdowns. But unfortunately, we don't really have a lot of price history for Bitcoin. So we can't go back and look at all the other times. So now what we're going to do is we're going to see how did the S&P behave with all these prior shutdowns. Okay. So we just have the one that started today. You can also see there was one near the end of 2018.
What's really interesting about that one is that when the shutdown began in 2018, it basically marks the bottom. And that's actually a common thing that you'll see. If the S&P is going down before a shutdown, a lot of times that actually ends up marking a low. You can see that also marked a low here in 2013, right? You can see that as that shutdown began, that ended up marking a low, kind of like it did in 2018.
The difference though that you have to consider is that if the market is going up into a shutdown, you know, you can't obviously then say, well, it necessarily marks the low, right? Like in 2018, we had a shutdown that only lasted for like a couple of days. We went up a little bit more, and then we had a a sizable correction.
So, all in all, um, as as boring as this sounds, and as as much as I know people really want to definitively know how this is going to affect the markets, one of the things we can say is that if the market is capitulating into the government shutdown, it tends to mark a low. But that's also not what we're really seeing right now. Like, we haven't, if anything, the the S&P 500 has just been going up since April, um, with very shallow pullbacks.
So, let's go back a little bit further and see, you know, what else has happened. So, we've had some other instances as well where the S&P was going up into a shutdown, and it sometimes led to very small corrections, right? Like nothing too major. Sometimes you'll see that. Um, and here's another one in 1978 where we were going up sort of into it, and then we ended up getting a a small correction. Um, I mean, 10% drops in the S&P are are are actually fairly common. Um, we got a, we got a correction there. You can see we also got a correction there about 10%.
Um, so I, it's really not like that uncommon for for that to happen. And so what I would say is that, you know, when you go look throughout all of history, you'll find times where the market doesn't really seem to move during the shutdown, or if you're, if you've been going up for a while before the shutdown, it can sometimes lead to a short-term correction, right? A short-term correction.
Um, and so I, I think what I, what I want to say is that like, you know, I don't really think you should go into this assuming one way or another specifically how this has to play out. There's plenty of examples throughout all of history that show you different outcomes. The only things we can really say, if the market is going up aggressively into a shutdown, it can often mark local tops or a little while. If the market is going down into a shutdown, it can often mark local lows for a little while. In all cases, in all cases, the S&P eventually recovered, right? And that's kind of the important point is that, and here's an example in, uh, 1995 where it marked a sort of like you had like some local tops here, but the the S&P barely got a correction, like it only dropped, you know, four to 5%.
And I've actually said a few times that sort of in the late September, early October phase, we could see about a 5% drop in the S&P 500. We already saw Bitcoin do that exact thing, right? It dropped to its 20-week SMA. Um, and sort of the argument was that, well, you know, maybe the S&P will will do the same thing, and it'll get this nice little 5% drop down to its its 20-week SMA. And I, you know, I said back then, I don't know what the narrative is going to be, but I'm sure there will be one. Maybe that is the narrative. I, I, I don't really know. Uh, but it is, it is important to sort of remember here that, um, the context of of what the S&P is doing going into the shutdown. And if there is a correction, if there is a, a small correction, four or 5%, you know, there's a decent chance the S&P would just find support at maybe the 20-week moving average. Um, it actually, the S&P actually found support around that level back in 2021 in early October. So, just something to think about.
And then the last thing we'll do is we'll look at how has gold historically responded to to government shutdowns. So far, you know, we've seen gold rally like crazy, um, for a long time. You guys, you guys know I've been really bullish on gold for a while. Back in, uh, 2018, gold rallied into the shutdown. It, it stalled a little bit, and then it r, it just continued to rally, right? So, I still think gold will remain bullish until silver sweeps the prior all-time highs. And for it to do that, it would probably need to go to at least $50 or so.
Uh, if you look at, you know, this government shutdown in 2018, it did mark a local top for gold, but in that case, gold still stayed at the same price for basically the next 3 months, right? Like it didn't get a larger drop until later on in the year. Um, here's an example where gold was already going down into the government shutdown. It went down a little bit more. I think the, the, the point that's like sort of the, the boring point about this stuff is that a lot of people want to use the government shutdown to definitively say like which way a certain asset will go. But if you actually look throughout all of history, you'll see that there's very different behaviors and you can't definitively say one way or another, you know, what has to happen.
In 1995, after the shutdown, gold spiked and then got a correction. Um, and, you know, plenty of other shutdowns in the 1970s, which were treated differently than than they're treated now. But arguably gold, you could argue, is is in a bull market similar to the one that we had in the 1970s. And so what you will notice during some of those shutdowns is that gold continued to go up into some of them, and then it got a brief correction on the other side of them. Right? Okay. And that, that's actually happened many times where it would go up into them, get a brief correction on the other side of it.
And so what I would argue if you use that in confluence with what we've talked about with gold and silver is that I don't think the government shutdown by itself is going to have a very large effect on on what gold does. I think that whenever silver sweeps this high, you'll see gold get a correction. Now, maybe the government shutdown will be blamed for that, but this has been something we've talked about for a long time that silver on on the breach of the prior all-time high, gold should get a correction. And it's the same thing with Bitcoin and Ethereum, right? Bitcoin got this correction back to the 20-week SMA after Ethereum, right? After Ethereum broke its all-time high. So government shutdowns can be blamed for stuff, but it doesn't really mean that that's the reason why it actually played out.
So that is long story short as to how the government shutdowns have affected financial markets in the past. To summarize, if the market is capitulating before the shutdown, it tends to mark a low. If the market is going up aggressively into a shutdown, it can cause the market to stall out as long as the shutdown is going on. And in some cases, it can drop 5 to 10%. But in all prior cases, the S&P did eventually go higher after, you know, sometime after the shutdown was over. So, just a lot of things to consider. Uh, thank you guys for tuning in. Make sure you subscribe, give the video a thumbs up, and again, check out the sale on Into the Cryptoverse Premium at into the cryptoverse.com. I'll see you guys next time.