"Depreciation" trades spur a rebound in risk assets, with Bitcoin price hitting a new all-time high.

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The "devaluation" trade triggered by the U.S. government shutdown has fueled a rebound in global risk assets, with Bitcoin prices reaching new all-time highs. As political and economic uncertainty intensifies, investors are shifting funds into assets such as Bitcoin and gold to hedge against the risk of U.S. dollar depreciation.

The world's largest cryptocurrency surged to a new record high of $125,689 during Asian trading hours on Sunday (October 5), surpassing the previous record of $124,514 set on August 14. This rally in Bitcoin is supported by gains in U.S. equities and capital inflows into Bitcoin-related exchange-traded funds (ETFs).

This week alone, Bitcoin has risen by 12%, and is up more than 30% year to date. Market participants regard the U.S. government shutdown as a catalyst for the "devaluation trade," with investors anticipating that funds will flow into "safe haven" assets.

Geoff Kendrick, Head of Global Digital Assets Research at Standard Chartered Bank, said: "This shutdown is significant." He pointed out that Bitcoin is now more closely correlated with traditional risk assets and is expected to continue rising during this period.

Analyses indicate that Bitcoin's surge is also driven by institutional demand, technical factors, and seasonality. Notably, the market will closely watch congressional negotiations on federal funding, as well as the impact of Federal Reserve policy on the logic of the "devaluation trade." These factors will determine whether Bitcoin can sustain its current rally and achieve further breakthroughs.

"Devaluation Trade" Drives Multi-Asset Rally

The broad rise in risk assets reflects concerns over "devaluation," with several assets hitting new highs.

Besides Bitcoin, U.S. stocks also hit record highs on Friday, with the S&P 500 and Nasdaq Composite rising 0.5% and 0.27%, respectively. Spot gold rose more than 2% this week, marking its seventh consecutive weekly gain.

Joshua Lim, Co-Head of Markets at crypto brokerage FalconX, said:

"Many assets—including stocks, gold, and even collectible Pokémon cards—have reached record highs. It is not surprising that Bitcoin is benefiting from the U.S. dollar devaluation narrative."

The U.S. government shutdown that started on Wednesday has become a key factor driving the surge in Bitcoin's price. After lawmakers failed to reach an agreement on federal funding, investors turned to decentralized assets for safe haven.

Kendrick noted that Bitcoin's performance during this government shutdown is markedly different from December 2018 to January 2019. He stated:

"During the last government shutdown under Trump, Bitcoin was in a different position, so its performance was lackluster. However, this year, Bitcoin is now being traded in relation to U.S. government risk, best reflected by its relationship with U.S. Treasury term premia."

Multiple Bullish Factors Combine

Bitcoin's sustained rally is being supported by growing institutional demand.

Under a favorable legislative environment spearheaded by Trump, listed companies like Michael Saylor's MicroStrategy have adopted corporate strategies of hoarding cryptocurrencies, boosting market demand.

This strategy has spread to smaller competitors such as Ethereum, driving broad gains across the digital asset sector.

Inflows into Bitcoin-related ETFs have provided additional momentum for price increases. These products make it easier for traditional investors to participate in Bitcoin investment, expanding the base of market participants.

In addition, Bitcoin’s historical performance in October also provides technical support for the current rally.

This month is referred to by the market as "Uptober," with Bitcoin having risen in nine out of the past ten Octobers, reinforcing bullish investor sentiment.

Risk Warning and DisclaimerThe market has risks; investment needs to be cautious. This article does not constitute personal investment advice and does not take into account the specific investment objectives, financial status, or needs of individual users. Users should consider whether any opinions, views or conclusions in this article are suitable for their particular circumstances. Investing based on this is at your own risk. ```