Bitcoin rallies as US shutdown fuels investor caution

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Introduction

The U.S. government has entered its first shutdown in seven years, after Congress failed to pass a temporary funding bill. Political gridlock added to investor caution, but rather than sparking broad market weakness, it reinforced safe-haven demand for Bitcoin. BTC rallied back above US$119K, fuelled by a sharp short squeeze that cleared key resistance levels.

Traditional markets showed resilience, with U.S. equities pushing to new highs mid-week as softer ADP employment data strengthened the case for near-term Fed rate cuts. For crypto, the mix of macro uncertainty, easing expectations, and steady ETF inflows created a supportive backdrop. Institutional appetite remained intact, even after one of the largest liquidation events since February.

Check prices on the BTC Markets exchange.

State of crypto

• Bitcoin rebounds above US$119K as short squeeze clears key levels
• Ethereum climbs toward US$4.4K, with momentum stretched but intact
• Solana regains ground, testing US$220–225 after recent pullbacks
• XRP consolidates near US$2.95, with resistance at US$3.20 in focus
• Crypto ETFs attract net inflows, lifting BTC to US$58B and ETH to US$24B

Bitcoin rebounds above US$119K as short squeeze clears key levels

After explosive liquidations to the downside last week, BTC has bounced back strongly in the short term, touching US$119.4K with a fast bounce triggering key liquidation levels in the range between US$116K and US$118K, where clusters of short positions have now been cleared, causing an additional short squeeze. The 4-hour charts show a decisive push back above the 50-period moving average, and the RSI is entering overbought territory at over 80. Momentum looks extended, so traders should be cautious of cooling after this short-term bounce, which has been surprisingly strong, although immediate support sits around US$113.5K and US$114K. On the daily timeframe, Bitcoin continues to respect its broader uptrend, holding well above the 200-day MA near US$105K, with strong horizontal support between US$85K and US$90K. The RSI is hovering in the early 60s.

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Ethereum climbs toward US$4.4K, with momentum stretched but intact

Ethereum (ETH) has followed Bitcoin higher, with the 4-hour chart showing a sharp rebound from late-September lows, peaking at just under US$4,400. RSI has climbed into the early-mid 70s, suggesting short-term momentum is strong but stretched. ETH has met some resistance at its 50-period moving average. The daily structure remains bullish, with ETH trading above its 200-day MA (US$2,986) and consolidating after a strong August rally. Key support sits around US$4,200 to US$4,250, while resistance remains closer to US$4,500.

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Solana regains ground, testing US$220 to US$225 after recent pullbacks

Solana (SOL) has regained ground after recent pullbacks, with the 4-hour chart showing a recovery above the 50-MA. RSI has lifted into the mid-60s, signalling renewed momentum. On the daily chart, the longer-term trend remains constructive, with SOL well clear of its 200-day MA (US$167) and holding above layered support near US$148 to US$160. Traders should watch the US$220 to US$225 zone as a near-term resistance test.

Check SOL

XRP consolidates near US$2.95, with resistance at US$3.20 in focus

XRP has shown a more muted recovery, trading around US$2.95 on the 4-hour chart after reclaiming short-term moving averages. RSI is mid-60s, leaving room for continuation but still shy of overbought. On the daily timeframe, XRP continues to consolidate after its mid-year spike, with the 200-day MA (US$2.55) acting as a firm base. Resistance sits near US$3.20, with support at US$2.80 to US$2.85.

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Crypto ETFs attract net inflows, lifting BTC to US$58B and ETH to US$24B

Institutional appetite for crypto ETFs remained constructive over the past week, with both Bitcoin and Ethereum products posting net inflows. The flows suggest ongoing positioning despite heightened market volatility.

Bitcoin ETFs saw a 7-day net inflow of US$1.2B, bringing cumulative flows to US$58B. Daily activity was more subdued, with a 1-day net gain of US$263.7M. The balance of US$2.8B in weekly inflows against US$1.6B in outflows highlights continued interest, though at a steadier pace compared to earlier surges.

Ethereum ETFs recorded a 7-day net inflow of US$720M, lifting cumulative flows to US$24.1B. The most recent day added US$54.7M, reflecting a modest but positive bias. Weekly inflows of US$1.8B versus US$1.1B in outflows indicate institutional support, though not as strong as Bitcoin’s.

Overall, flows into both asset classes underscore resilient institutional demand, especially following the extensive liquidations last week, which presented strong buy-the-dip opportunities. Overall, BTC maintains its leadership with ETH showing steady follow-through.

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Market steadies as Bitcoin dominance nears 59% and total cap rebounds to US$4.03T

Bitcoin dominance sits just under 59%, up from lows after mid-year peaks near 66%. The rebound highlights steady institutional demand via ETF inflows, while talk of a potential Solana ETF has kept SOL in focus. For now, BTC continues to anchor flows, with majors like ETH and SOL testing selective rotation.

The total crypto market cap has recovered to around US$4.03T after dipping below US$3.8T in late September. Volumes held steady near US$190B to US$200B, reflecting renewed strength in BTC and ETH on ETF support and rate-cut expectations.

Within the top 20, Stellar (XLM) and Sui (SUI) gained 5% to 9%, while Litecoin (LTC) and Bitcoin Cash (BCH) also advanced. Avalanche (AVAX) fell more than 10%, showing profit-taking after strong gains.

Overall, the market is consolidating: BTC leads institutional flows, majors hold firm, and altcoins show rotation into select names rather than broad rallies.

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Crypto Fear & Greed Index

Source: Fear & Greed Index

BTC Markets in the news

Bloomberg: Crypto Slump Intensifies Ahead of $22 Billion Options Expiry

Ether’s retreat came as “institutional inflows cooled” with “technical signals pointing to short-term pressure,” said Rachael Lucas, a crypto analyst at BTC Markets, who expects more liquidations to follow if Ether’s slide takes it below $3,800.

Cointelegraph: Ether supply on exchanges hits 9-year low amid ‘Wall Street glow up’

BTC Markets analyst Rachael Lucas said on X that Ethereum was getting “the Wall Street glow-up.”

“Treasuries are stacking ETH, exchange supply hits 9-year low, and Tom Lee’s calling $10K to $15K by year-end.”

The Block: Ethereum dips below $4,000 amid macro jitters and slowing ETF inflows

"Ethereum’s recent dip below the psychological $4K mark was triggered by a mix of technical breakdowns, macroeconomic jitters, and cascading liquidations," said Rachael Lucas, crypto analyst at BTC Markets. "A failure to hold the $4,200 support zone led to over US$1.7 billion in altcoin liquidations, with ETH alone accounting for US$212.9 million."

Announcements

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Australia FIX Conference 2025

The Australia FIX Trading Community Conference will take place in Sydney on 22 October.

This year’s agenda features high-level discussions on market structure, regulatory change, and the technologies driving next-generation trading.

Rachael Lucas, Head of Marketing & Communications at BTC Markets, will join the panel “Digital Assets & Tokenization: A Strategic Side Note” to share her perspective on crypto’s role in modern market infrastructure.

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The week ahead: Economic events

Thursday, October 2nd 

• Australia Balance of Trade
• Japan Consumer Confidence

Friday, October 3rd

• United States Non Farm Payrolls, Unemployment Rate, ISM Services PMI

Tuesday, October 7th

• Australia Consumer Confidence MoM
• Canada Ivey Purchasing Managers Index

Wednesday, October 8th

• Australia Business Confidence

Source: Trading Economics

Market reflections

• United States: Data mixed as PCE rises, labour signals soften
• Eurozone: Inflation edges up, growth momentum slows
• China: PMI improves, but deflation risk lingers
• Japan: Manufacturing weakens, BoJ holds policy steady
• Australia: Inflation accelerates as labour market cools

United States: Data mixed as PCE rises, labour signals soften

August PCE inflation, released 27 September, rose 0.3% month-on-month and 2.7% year-on-year, with the core measure holding at 2.9%. On an annual basis, headline PCE inflation (Personal Consumption Expenditures) accelerated to 2.7%, its highest level in six months, rising from 2.6% in both July and June.

The final Q2 GDP reading was revised up to 3.8% annualised, while initial jobless claims for the week ending 20 September fell to 218K. Consumer sentiment was revised lower to 55.1.

Eurozone: Inflation edges up, growth momentum slows

Preliminary September CPI showed headline inflation accelerating to 2.2% year-on-year, while core inflation held at 2.3%. (Source: TradingEconomics) The manufacturing PMI slipped back into contraction at 49.8, down from 50.7 in August. Consumer confidence improved modestly to –14.9. The ECB kept its deposit rate at 2% and emphasised a data-dependent approach. Markets were largely unmoved.

Why it matters for crypto: Weakening growth alongside sticky inflation keeps Europe in a higher-rate environment, shaping investor risk sentiment.

China: PMI improves, but deflation risk lingers

The Caixin manufacturing PMI rose to 51.2 in September, its best since March. Consumer prices in August fell 0.4% YoY, highlighting mild deflation. Authorities rolled out a ¥500bn policy-bank refinancing scheme and urged banks to lower funding costs.

Why it matters for crypto: China’s mixed signals affect global demand for risk assets and liquidity flows into digital markets.

Japan: Manufacturing weakens, BoJ holds policy steady

The final September manufacturing PMI was revised to 48.5, marking the 14th contraction in 15 months. The Bank of Japan maintained its accommodative stance but noted a possible rate hike if wages rise. Market reaction was muted.

Why it matters for crypto: macroeconomic weakening may redirect Japanese capital away from higher-risk assets such as crypto.

Australia: Inflation accelerates as labour market cools

The August monthly CPI accelerated to 3.0% year-on-yearfrom 2.8%, led by a 24.6% surge in electricity prices. Building approvals dropped 6% month-on-month, employment fell by 5.4K, and the participation rate slipped to 66.8%. Unemployment stayed at 4.2%. The RBA held the cash rate at 3.60% and flagged uncertainty around the outlook. Higher inflation, weaker labour and housing data tempered rate expectations.

Why it matters for crypto: Domestic inflation pressures and an uncertain RBA stance shape AUD-denominated crypto activity and investor sentiment.

Closing thoughts: Caution dominates despite selective strength

This week underscored that both macro and crypto markets remain in a holding pattern rather than at a decisive turning point, despite the short-term rebound in BTC and ETH. Inflation data and central bank commentary suggest policies will stay flexible, with growth and labour signals soft enough to justify caution but not yet pointing to recession. This steadies interest rate expectations, anchoring liquidity conditions and overall risk appetite.

In crypto, Bitcoin has maintained its broader range while ETF flows stayed supportive, reinforcing institutional preference for BTC as the sector’s anchor. Altcoins showed selective strength, with rotations into majors like ETH and SOL indicating where investors are still willing to extend risk. Overall, the balance between policy uncertainty and cautious optimism continues to guide flows across both traditional and digital markets.

The full impact of the U.S. government shutdown remains unclear and may encourage investors to take a more cautious stance as developments unfold.

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