The third week of the U.S. government shutdown! Approval for 16 cryptocurrency ETFs is stuck, and the altcoin season is hanging.

The U.S. government shutdown has entered its third week, with 16 cryptocurrency ETFs waiting for SEC approval coming to a complete standstill, while 21 new applications have flooded in without anyone to process them. The Republican Party demands a reduction of $37.8 trillion in debt, while the Democratic Party opposes cuts to healthcare spending, and the deadlock between the two parties shows no signs of resolution. Analysts warn that once the government shutdown ends, the gates for cryptocurrency ETFs will burst open, and the altcoin season may follow.

U.S. Government Shutdown Paralyzes SEC: 16 Cryptocurrency ETF Approval Frozen

(Source: X)

On October 1st, the Republican and Democratic parties failed to reach a funding agreement, causing most departments of the U.S. government to shut down, officially starting the government closure. This led to various agencies, including the U.S. Securities and Exchange Commission responsible for approving ETF applications, to rely solely on essential personnel to operate. For the Crypto Assets ETF industry, the timing of this U.S. government shutdown is extremely unfortunate, as October was supposed to be a crucial month for the approval of Crypto Assets ETFs.

According to the original schedule, the SEC needs to make a final decision on at least 16 cryptocurrency ETFs in October. These cryptocurrency ETF applications cover a variety of asset classes, including XRP spot ETF, Solana ETF, Litecoin ETF, and other altcoin ETFs. To make matters worse, within 8 days before October, the SEC received an additional 21 new cryptocurrency ETF applications. However, the U.S. government shutdown has put everything on hold, the original approval deadline has passed, but the SEC has taken no action, leaving all applications in a state of limbo.

This regulatory vacuum has created significant uncertainty for cryptocurrency ETF applicants and potential investors. Applicants have invested considerable time, effort, and resources in preparing their application documents, and now they do not know when they will receive a response. Investors had initially hoped that the approval of these cryptocurrency ETFs would bring new capital inflows and liquidity to the market, but this expectation has now been indefinitely postponed. Even more concerning is that if the U.S. government shutdown continues into November, the backlog of cryptocurrency ETF applications may further increase, creating a massive queue awaiting approval.

XRP ETF is one of the categories of cryptocurrency ETFs most affected by the U.S. government shutdown. The market originally expected the SEC to make decisions on multiple XRP spot ETF applications around October 18, which was seen as a potential catalyst for driving up XRP prices. However, the U.S. government shutdown has completely disrupted this timeline, with betting platform Kalshi now predicting that the shutdown could last up to 25 days, further delaying regulatory decisions on cryptocurrency ETFs. This is a significant blow for XRP investors betting on the favorable approval of ETFs.

The impact of the US government shutdown on the approval of Crypto Assets ETFs is not limited to delays in timing. After the government reopens, the SEC will face a backlog of cases awaiting approval, not only for Crypto Assets ETFs but also for various applications in the traditional finance sector. This could lead to the approval of Crypto Assets ETFs requiring additional time to process, even if the government is operational again. Furthermore, a prolonged shutdown may affect the morale and efficiency of SEC staff, further slowing down the approval process.

The deadlock between the two parties shows no end in sight: $37.8 trillion debt becomes key

The fundamental reason for the U.S. government shutdown is the profound disagreement between the Republican and Democratic parties on budget issues, and there are no signs of a resolution in the short term. The core demand of the Republicans is to cut federal spending to reduce the ever-growing national debt, which has now ballooned to over $37.8 trillion, or about $111,000 per person. This astronomical figure has greatly alarmed fiscal conservatives, who believe immediate action must be taken to control debt growth. At the same time, the Republicans also hope to increase funding for priority areas such as border enforcement.

The Democratic Party strongly opposes cuts to social welfare spending, particularly in the healthcare sector. They are concerned that cuts will harm the most vulnerable populations and wish to extend the soon-to-expire tax credits to reduce people's health insurance costs. There is a significant gap between the two sides on these fundamental values and priority issues, making it difficult to find a compromise. This deadlock could lead to a prolonged government shutdown in the United States.

The Senate is currently planning to vote on Tuesday, but the House of Representatives is in recess, so it cannot immediately end the U.S. government shutdown. To resolve this situation, Congress must pass a complete budget that includes 12 separate bills, or pass a continuing resolution to keep the government running. Once the bill passes and is signed by President Trump, the U.S. government shutdown will end. However, although the Republican Party controls both chambers of Congress, they cannot achieve the votes needed to pass the bill in the Senate without Democratic support.

This is the 11th time the U.S. government has shut down in history, and the first since the shutdown from December 2018 to January 2019. That shutdown lasted 35 days, making it the longest one to date, severely impacting government operations and economic activities. If this U.S. government shutdown approaches or exceeds that record, the impact on Crypto Assets ETF approvals will be catastrophic.

Crypto Assets ETF gate is about to burst? alts season suspense

Despite the short-term disruptions caused by the U.S. government shutdown, some analysts remain optimistic about the long-term prospects of cryptocurrency ETFs. ETF analyst and President of NovaDius Wealth Management Nate Geraci predicted on October 13 on the X platform: "Once the U.S. government shutdown ends, the gates for spot cryptocurrency ETFs will open," anticipating a wave of large-scale approvals. His logic is that the more backlog applications there are, the SEC may adopt a faster approval process to clear the backlog after the U.S. government shutdown ends.

Geraci also sarcastically pointed out: "The ever-growing fiscal debt and habitual political theatrics are hindering these plans. This is precisely the goal of cryptocurrencies." This statement reveals the core argument of cryptocurrency advocates: when traditional government institutions are unable to function properly due to political infighting, decentralized cryptocurrency systems demonstrate their advantage of being unaffected by political interference. The U.S. government shutdown highlights the fragility of centralized systems, which may, in turn, strengthen people's interest in cryptocurrencies.

Analysts made a bold prediction in August: if all proposed cryptocurrency ETFs are approved, it would trigger a new altcoin season. The logic is that cryptocurrency ETFs lower the investment threshold and risk, allowing traditional investors to access crypto assets through regulated products. This convenience and compliance will attract a significant amount of funds that have previously been on the sidelines due to technological barriers or regulatory concerns. When these funds flow in, it will not only drive up the prices of the assets underlying the ETFs but also boost the overall sentiment in the cryptocurrency market, leading to a broader rally.

However, the U.S. government shutdown casts a shadow over this beautiful vision. If the stalemate continues throughout October or even extends into November, the anticipated fourth-quarter altcoin season may be delayed or weakened. Market sentiment and capital flows are time-sensitive, and delayed approvals could miss the best market timing. Furthermore, prolonged uncertainty itself can harm market confidence, and investors may turn to other investment opportunities rather than wait for cryptocurrency ETFs.

For participants in the Crypto Assets market, the U.S. government shutdown has created a complex situation. In the short term, the absence of favorable cryptocurrency ETFs may limit the market's upward potential. However, from another perspective, this also extends the time window for establishing positions before large-scale approval of cryptocurrency ETFs. Investors who believe that the ETF gates will eventually open can take advantage of the current uncertainty and relatively low prices to accumulate positions, waiting for the potential explosion after the U.S. government shutdown ends.