Global markets remain in a state of intense risk aversion, still reeling from the fallout of last week’s major flash crash on October 10th. That event, which wiped out nearly half a trillion dollars in crypto market capitalization, sparked broad volatility and a significant flight to safety that has impacted all asset classes. This lingering instability is compounded by ongoing U.S.-China trade tensions and a U.S. government shutdown. The shutdown, in particular, is weighing heavily on sentiment as it delays key economic readings, leaving investors with little data to navigate the uncertain environment.
Amid this risk-off mood, traditional safe havens are seeing massive inflows. Gold has been the primary beneficiary, with prices surging as investors center on the idea that the US dollar is rapidly decreasing in value while the Federal Reserve continues to print more T-bills. Seen as the ultimate refuge from both inflation and market volatility, the price of gold is currently trading at $4,240, reflecting an impressive increase of 30% over the last 3 months. This rally has pushed the precious metal up 60% over the last year, demonstrating a clear and growing loss of faith in fiat currencies.
Gold Spot US Dollar
The seasonal optimism known as "Uptober" has roundly failed to materialize this year. Instead, this is shaping up to be the worst October for Bitcoin since 2018, with the asset down 5% month-to-date. Digital assets have closely tracked the declines in global risk assets, as macro risks, including the U.S.-China tariff standoff and weak liquidity, have smothered any hope of seasonal strength.
Bitcoin fell 3.19% from last week to $111,046 and is set for its second straight week of heavy lossesThe coin is struggling to build any momentum after last week’s flash crash dragged it to a low of $104,000 and triggered a record-high $19 billion in liquidations. It now trades well below the record highs of over $126,000 seen in early October. The recent sharp selloff appears attributable primarily to crypto-native traders rather than traditional investors. This assessment is supported by the negligible liquidation activity observed in spot Bitcoin ETFs. Furthermore, CME Bitcoin futures—a key barometer of institutional sentiment—exhibited limited stress, indicating the deleveraging was concentrated among participants indigenous to the asset class, as opposed to regulated, mainstream institutions.
Bitcoin Price (USD)
As the market looks ahead, the focus remains on two key areas: emerging systemic credit risks and the ongoing government shutdown. While the crypto crash dominated headlines last week, a growing concern over credit stress in the U.S. banking system is rattling investors. Regional lenders Zions Bancorporation (ZION) and Western Alliance (WAL) plunged after disclosing significant problems with their loan portfolios. Any further signs of contagion in the regional banking sector could trigger a much broader market selloff.
Furthermore, the U.S. government shutdown continues to be a primary source of uncertainty. Its most immediate impact is the halting of key economic data releases, such as inflation and employment reports. This effectively leaves investors and, more importantly, the Federal Reserve, "flying blind" on the health of the economy. Without this data, it becomes increasingly difficult to predict monetary policy, adding another layer of volatility and risk to an already fragile market environment.