Did the US government shutdown really cause dumping? On-chain data tells the truth.

The government was shut down for 36 days, BTC fell below 100,000 dollars, but is this really just a chain reaction caused by a political blunder?

The key lies in this number: the U.S. Treasury General Account (TGA) expanded from $800 billion to over $1 trillion in just 20 days, equivalent to directly withdrawing $700 billion in liquidity from the financial system. This is not an ordinary adjustment, but an invisible liquidity tightening.

The system has a “high fever”

The most direct manifestation is that the interbank overnight borrowing rate SOFR skyrocketed to 4.22%, not only exceeding the Federal Reserve's benchmark rate ceiling of 4.0%, but also reaching a new high since the pandemic in 2020. The banking system is so short of funds that it has started to knock on the Federal Reserve's last window - the usage of the SRF emergency tool surged to $50.35 billion, also the highest since the pandemic.

This chill has transmitted to the weak links of the real economy. The commercial real estate default rate in the United States has reached 11.8%, surpassing the 10.3% recorded during the 2008 financial crisis. Even Microsoft's previously fully rented Bellevue office building has seen its valuation fall from 605 million to 268 million, a decline of 56%.

How do traders view it?

The bears represented by Mott Capital believe that this is a liquidity shock at the level of the end of 2018, which cannot be endured. However, macro big V Raoul Paul proposed the “pain window” theory - the government shutdown is just a short-term bloodletting, and once resolved, the hundreds of billions of dollars that have been frozen will be released instantly. Moreover, the U.S. government will need to stimulate the economy for the 2026 mid-term elections, leading to a new round of easing.

Goldman Sachs and Citigroup tend to be neutral, expecting the government shutdown to be resolved within 1-2 weeks, after which liquidity will ease.

To put it bluntly, this wave of fall is triggered by a liquidity crisis, but in the long run, it may just be the prelude to the next wave of larger-scale easing. History always repeats itself – the panic of the tapering in 2018, the repo crisis in 2019, and in the end, it was the Federal Reserve compromising and injecting liquidity. This time, it is also likely to escape this cycle.