The US government is about to shut down! XRP $173 billion bull run may be in jeopardy, how should institutional investors respond?

The crypto assets market is facing a severe challenge from Washington. With the risk of a government shutdown in the United States rising to 73%, the long-awaited breakthrough rebound for Ripple (XRP) may be forced to delay. The political deadlock not only threatens the approval process of the XRP ETF but could also hinder Ripple's key strategic deployments, casting a shadow over this market capitalization third-largest crypto asset. This article delves into how this political storm affects the market outlook for XRP and how investors should adjust their strategies.

Government Shutdown Risk Soars: Washington's Political Stalemate

(Source: PBS)

The likelihood of a government shutdown in the United States has risen to its highest level in years. According to data from the prediction market Kalshi, the probability that lawmakers will fail to pass a funding bill before the fiscal deadline of October 1 is as high as 73%. This staggering number reflects the severe divisions in Congress over the past few weeks and the reality of political negotiations being at an impasse.

It is particularly noteworthy that President Donald Trump has decided to cancel budget negotiations with Democratic leaders, a move that greatly reduces the likelihood of reaching a compromise. If lawmakers fail to reach an agreement by midnight on September 30, federal agencies will lose their spending authority, leading to a complete shutdown of non-essential government operations.

This situation will be similar to the 34-day government shutdown during Trump's first term, when hundreds of thousands of federal workers were forced to take unpaid leave, significantly impacting the economy and financial markets.

In this political tug-of-war, both sides are blaming each other. Former President Barack Obama believes that "the Republican Party would rather shut down the government than help millions of Americans afford healthcare costs." The White House countered by stating that the Democrats are jeopardizing funding for veterans, seniors, and law enforcement, pushing the nation "to the brink of collapse."

The Direct Impact of Government Shutdown on Crypto Regulation

The consequences of a government shutdown will extend far beyond the Washington political circle, having a profound impact on the Crypto Assets industry, especially on assets like XRP that are closely related to regulation.

Once the government shuts down, key regulatory agencies like the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) will be forced to significantly reduce their staff, retaining only the most essential operations. This means that the review of digital asset filings will be significantly slowed down, and may even come to a complete halt.

This timing is particularly unfavorable for XRP. Currently, six well-known financial institutions, including Grayscale and 21Shares, have submitted applications for the XRP spot ETF, which are facing a critical deadline in October. ETF analyst Nate Geraci stated that the upcoming quarter was originally expected to be an "extremely busy" period for the review schedule, with significant review decisions anticipated for a range of tokens.

The government shutdown will force the review process of these applications to be suspended, delaying the approval timeline. Considering that spot ETFs can lower the entry barrier for institutional and retail investors by providing regulated risk exposure, this delay could significantly undermine the momentum of new capital inflows into digital assets that analysts expect.

Ripple's Double Blow: National Bank License Application Blocked

In addition to the delay in ETF approvals, Ripple faces a second significant challenge. The company has viewed the application for a national bank charter in the United States as a key strategy for establishing a payment channel linked to the US dollar, but this application is entirely dependent on the review by the Office of the Comptroller of the Currency (OCC).

If the government remains closed for a long time, the assessment work of the OCC will be suspended, thereby delaying important milestones in Ripple's U.S. strategy. This will have a direct impact on the company's business expansion plans and market competitiveness, which may in turn affect the long-term value proposition of XRP.

The CEO of Ripple has emphasized multiple times that obtaining a banking license is crucial for the company's compliance operations in the US market, especially in establishing deep cooperative relationships with traditional financial institutions. Approval delays caused by government shutdowns may put Ripple at a disadvantage in competition with its rivals.

XRP Price Trend: Whale Activity and Market Uncertainty

This regulatory uncertainty has begun to affect the market performance of XRP. Despite stable interest from institutional investors, the trading price of the token has fluctuated within a narrow range below $3 over the past month, failing to break through the key resistance level.

However, technical analyst Ali Martinez recently observed an interesting phenomenon: whale investors have purchased 120 million XRP in the past 72 hours, indicating that market confidence may be reigniting. This large-scale accumulation behavior is often seen as a precursor to an impending price increase.

This whale activity has laid the foundation for XRP to establish a foothold and potentially build market momentum. However, if the upcoming government shutdown reverses investors' interest in risk digital assets like XRP, this accumulated positive momentum could be quickly offset.

$173 billion market opportunity: Potential breakthroughs and risks of XRP

(Source: Trading View)

Analysts generally believe that if the regulatory environment is clear and favorable, XRP has the potential for breakthrough growth, with a market capitalization possibly reaching 173 billion USD, equivalent to a price of about 3.25 USD per XRP. This prediction is based on the practicality of XRP in the cross-border payment sector, increased institutional adoption, and the capital inflow that could result from ETF approvals.

However, the uncertainty brought about by the government shutdown could severely hinder the realization of this optimistic outlook. Particularly in the following several aspects:

ETF approval delay: The approval of the XRP ETF is seen as a key catalyst for driving price increases, and any delay could postpone the anticipated inflow of funds.

Regulatory uncertainty intensifies: During the government shutdown, regulatory agencies are unable to issue clear guidance or decisions, increasing market uncertainty.

Institutional Investors on the Sidelines: In the face of political instability, institutional investors may adopt a wait-and-see attitude, delaying their investment plans for XRP.

Market Sentiment Fluctuation: Political risks may lead to a deterioration of overall Crypto Assets market sentiment, affecting the short-term price performance of XRP.

Investor Strategies: Opportunities and Challenges in Political Turmoil

In the face of this complex situation, how should investors adjust their strategies? Here are a few suggestions:

· Short-term strategy adjustment

Risk Management First: Given the political uncertainty, investors may need to reduce leverage and set stricter stop-loss levels.

Diversified Portfolio: Avoid excessive concentration in a single asset, especially those significantly affected by regulatory risks.

Focus on Technical Indicators: In situations where the fundamentals are unclear, technical analysis may provide more reliable short-term trading signals.

Observe Whale Activities: The behavior of large holders often leads the market and can serve as an important reference indicator.

· Long-term investment considerations

Historical Experience Reference: Past government shutdowns have typically been short-term events with limited long-term impact.

Pay attention to regulatory developments: Even during government shutdowns, closely monitor any potential regulatory news.

Assessing Fundamental Value: The utility and network value of XRP will not be affected by short-term political events.

Buy on Dips: Market panic may create favorable opportunities for low-price purchases.

Conclusion: Balancing Political Risks and Market Opportunities

The U.S. government shutdown will undoubtedly bring short-term challenges and uncertainties to XRP and the entire crypto market. Delays in the regulatory process may postpone XRP's breakthrough growth, making its $173 billion market potential temporarily difficult to achieve.

However, in the long run, government shutdowns are usually temporary events, and their impacts are often exaggerated by the market. For patient investors, these short-term fluctuations may create favorable entry opportunities.

Most importantly, investors should remain calm, avoid emotional decision-making, and formulate reasonable investment strategies based on their own risk tolerance and investment goals. Regardless of how political storms evolve, the fundamental value proposition and long-term development prospects of XRP are still worth paying attention to.