Bitcoin holds $106K as shutdown optimism fuels broad market rally

• Bitcoin bounced back to trade near $106,000 on shutdown resolution hopes.
• The end of the shutdown could release a $150-200B liquidity jolt into markets.
• However, the shutdown is stalling crucial US crypto regulation bills.

Cryptocurrency markets started the week on a strong footing, with Bitcoin holding above the key $105,000 level as growing optimism around a potential resolution to the US government shutdown helped steady broader risk sentiment.

Following a volatile period, a weekend rally extended into Monday, with Bitcoin recovering from an early dip to trade near $106,000.

However, analysts warn that while an end to the shutdown could provide a short-term liquidity boost, the prolonged political impasse has created a significant, under-the-radar threat to the crypto industry’s long-term regulatory future.

The upbeat mood was felt across the asset spectrum.

In the crypto space, Ether traded just under $3,600, while XRP led gains among major altcoins, jumping 9% on anticipation of a potential spot ETF.

Crypto-related stocks, which suffered heavy losses last week, also rebounded strongly, with Coinbase (COIN) rising 4.1% and Robinhood (HOOD) gaining 4.8%.

The rally mirrored gains in traditional markets, where the S&P 500 climbed 1.6% and the Nasdaq rose 2.2%.

This recovery was largely fueled by growing confidence that the record-breaking 39-day government shutdown may be nearing an end, a sentiment bolstered by prediction market data and a weekend social media post from President Donald Trump.

The shutdown’s double-edged sword for crypto

While the market is cheering a potential resolution, the shutdown has created a complex “Jekyll and Hyde” scenario for the digital asset industry, according to David Nage, head of research at Arca.

In a Monday note, Nage explained the positive side: an end to the shutdown could release a massive liquidity injection of 150–200 billion from the Treasury General Account into bank reserves. Historically, such a jolt has been a major tailwind for risk assets like crypto.

However, there is a significant downside.

“The larger story for digital asset adoption over the next three to five years is being shaped behind the scenes… and the Banking Committee staff rooms are currently dark due to the shutdown,” Nage explained.

A race against time for US crypto regulation

The ongoing shutdown has completely stalled progress on crucial crypto legislation, including the CLARITY Act and the Senate’s digital asset market structure bill.

Nage warned that this delay poses a greater long-term threat to the industry than recent market volatility.

With the 2026 midterm elections approaching, the window for passing comprehensive digital asset regulation is closing.

“If comprehensive digital asset legislation is delayed until 2026 and then dies in midterm politics, the industry will miss out on the regulatory clarity needed to attract institutional capital and achieve sustainable growth,” Nage said.

He concluded that the timing is critical. “If the shutdown ends in November, we may benefit from both a liquidity injection and a legislative opportunity,” he said.

If it drags into December, the legislation may miss its window.