This Week’s Top Stories – U.S. Gov’t Shuts Down, Crypto Tax Takes Centre Stage at Senate Hearing, EU Watchdog Float Bans of Multi-Issuance Stablecoins

Markets Shrug Off U.S. Gov’t Shutdown, but Crypto ETF Pipeline Plugged 

• On Wednesday, October 1, Congress failed to pass budgets to fund several federal agencies, effectively shutting down the U.S. government for the first time since 2019. Widely expected – with predictions platform Polymarket giving a 79% chance of happening – the shutdown failed to sink the buoyant mood across risk assets. “On fiscal theatre, a U.S. government shutdown should be a market non-event beyond data delays and headline noise,” trading company QCP Capital commented in its latest “Asia Color” research post. While market were relatively unaffected, the U.S. government shutdown is having an impact on crypto ETFs, as the SEC has halted review of applications for financial products. More than 90 pending applications for spot ETFs tracking various cryptos are now in limbo.

Expert Calls for Crypto Tax Exemption at Senate Hearing 

• The same day as the shutdown, the U.S. Senate Committee on Finance held a hearing to discuss the taxation of crypto assets, which featured a panel of industry experts, including crypto exchange Coinbase VP Lawrence Zlatkin. He urged the Senate committee to consider a de minimis tax exemption for cryptocurrency transactions under $300, arguing this would encourage commercial use in payments to ensure innovation occurs inside the US. “The same tax rules should apply to the same economic activity, whether it involves commodities, stocks, or tokens on a blockchain,” Zlatkin said. Massachusetts Senator Elizabeth Warren, a long-time crypto sceptic, countered that special tax exemptions for cryptocurrencies would come at the expense of other asset classes, which investors would abandon in favour of tax savings with crypto.

EU Pushes Back on Multi-Issuance Stablecoins 

• While last week several European Union banks came together to issue a MiCA-compliant stablecoin, with a swing of the pendulum, EU financial supervisor, the European Systemic Risk Board (ESRB), recommended banning multi-issuance stablecoins. These refer to certain stablecoins issued jointly in the EU and other jurisdictions – like like Paxos and Circle – which the ESRB believes carry systemic risks because issuers operating across the EU and abroad may have inconsistent regulatory and reserve management standards. The guidance is not legally binding but will pressure EU governments to put limits in place.

A Quick Crypto Overview – Bitcoin Back to $120’000

Riding the wave of investor scepticism in the wake of the U.S. government shutdown, Bitcoin rose to a 7-week high at $120’000. This move renewed investor sentiment, as October tends to be BTC’s most bullish month of the year. Gains recorded in 10 of the past 12 Octobers led to the coining of “Uptober”. Earlier in the week, crypto markets regained momentum after last week’s bloodletting with altcoins rising 3-4% and wiping out nearly $260 million worth of short positions. 

Aside from some institutional scepticism, stablecoins have been seeing parabolic growth, as indicated by analysts like Miles Deutscher. Among the “obvious winners” ahead of Q4, he highlighted coins tied to DEXs, AI and stablecoins. With global stablecoin supply surging past $297 billion, many expect it to eventually surpass $1 trillion as adoption spreads to institutions and even sovereign actors. 

In just the past week, several stablecoin projects have taken shape. French bank Société Générale announced the deployment of its USD CoinVertible and EUR CoinVertible stablecoins on DeFi protocols Morpho and Uniswap. Circle’s newly announced collaboration with Deutsche Börse Group aims to integrate USDC and EURC stablecoins with Deutsche Börse’s financial market infrastructure. Meanwhile, Polkadot is preparing to launch a new stablecoin pUSD through a community proposal, which is poised to unleash its DeFi potential and cut dependence on other stablecoins.  

Chart of the Week – Ethereum’s Best Quarter Since 2021

With the third quarter of the year officially concluding on September 30, CoinGlass quarterly data distinguished it as the best quarter for Ethereum since Q1 2021, as it achieved returns of nearly 69% compared to 6.41% for Bitcoin. While approaching these highs in the first quarters of 2023 and 2023 with 52% and 60%, respectively, it still fell far short of the exuberance of 2021, where it surged over 160% in Q1.

What’s Happening On-chain? – Bitcoin Holding Behaviour Shifts, Zcash Surges, Asian Adoption Ascends 

With Bitcoin emerging again past the $120’000 mark, on-chain data suggests the move is being underpinned by a shift in holder behavior. Long-term holders, who had been steadily realizing profits throughout the spring, are showing signs of easing their selling pressure. At the same time, short-term holders are stepping in to absorb coins at higher levels, indicating renewed confidence in sustaining prices above six figures. Historically, this dynamic has signaled the early stages of a new accumulation phase. If the pattern holds, it could provide a more durable base for Bitcoin’s next leg higher. 

But Bitcoin has not been the only coin on the upswing. Privacy coin Zcash rallied over 70% on Wednesday, hitting a 3-year high. Its rapid rise came as Thorswap DEX announced its users could now swap ZEC with BTC on their platform. However, the most likely narrative behind its sudden surge is the acceleration of various central bank digital currencies (CBDCs) and the general trend of increasing oversight of crypto from authorities. While “Bitcoin is insurance against fiat,” AngelList co-founder Naval said on X, “Zcash is insurance against Bitcoin.” 

Meanwhile, Asia continues to lead the charge in global cryptocurrency adoption. According to a study from Apex Protocol, some 24.4% of Singapore’s population holds digital assets—more than double the 11% recorded the year prior. Additionally, Circle highlighted Asia-Pacific as the fastest-growing stablecoin market, reporting $2.4 trillion in on-chain activity between June 2024 and June 2025. 

Digital Asset Fund Flows – Crypto ETFs Saw Outflow Reversals This Week 

One week ago, digital asset investment products experienced $812 million in outflows, as expectations for two U.S. rate cuts this year eased after stronger-than-expected economic data. Driven by inflation concerns, combined Spot BTC and ETH ETFs outflows amounted to $1.7 billion, which halted a month-long streak of inflows.  

Most of the significant outflows occurred in the U.S. (-$1 billion) but resilience demonstraed in other regions, such as inflows in Switzerland (+$126.8 million), Canada (+$58.6 million), and Germany (+$35.5 million), suggest that the negative sentiment was isolated to the US. Inflows were recorded by the newly launched ETFs tied to altcoins like Solana and XRP, highlighting fresh competition and diversification. 

Despite seeing big ETF outflows last week, new Bitcoin and Ethereum ETF inflows were recorded at the beginning of this week, reaching $1.06 billion, with ETH inflows outpacing those of BTC. The last few days have seen a streak of inflows, with Bitcoin ETF inflows amounting to $2.25 billion, and ETH $1.06 billion. The size and concentration, particularly for BTC ETFs, point to institutional re-risking via the largest, cheapest wrappers, like BlackRock’s IBIT and Fidelity’s FBTC. 

Market Sentiment – Crypto Markets Return From Fear 

The sentiment dashboard brightened this week without tipping into euphoria. CNN’s Fear & Greed sits at 53 — “Neutral” — signalling equities have digested recent headlines and are pausing rather than chasing.  

In digital assets, the mood warmed faster. The Crypto Fear & Greed Index prints 63 “Greed,” a sharp swing from 28 “Fear” last Friday. CoinMarketCap’s gauge tells a similar but cooler story at 57 “Neutral,” up from 32 “Fear,” implying improvement with pockets of hesitation beneath the surface. 

Positioning among retail remains split. The AAII survey shows Bullish 42.9%, Neutral 17.9%, Bearish 39.2%, almost unchanged week-over-week—confidence is building, conviction is not. 

Other Relevant News 

• Vanguard, one of the most conservative giants in global finance, is set to unlock crypto ETFs for millions of investors. 
• The UN releases a white paper praising blockchain in its pension fund system. 
• SEC halts trading of QMMM Holdings – a crypto-treasury firm – after 1000% surge  
• Iran introduces new restrictions on stablecoins as people flock from rial reaching new lows  
• Man with the highest IQ in the world makes a bullish prediction on the future of Bitcoin, sparking widespread debate  
• Ripple CTO David Schwartz to step down after 13 years at the firm. 
• Binance launches Crypto-as-a-Service (Caas) solution, allowing banks to offer crypto trading. 
• Tether co-founder defends his $1.1 million donation to the New York mayor days before he dropped out of the mayoral race. 
• Crypto needs non-USD stablecoins for utility, says Base creator Jesse Pollak.  
• Coinbase to integrate 1inch API to enhance token swaps.  

Looking Ahead 

Monday, 6 October, 2025 

• Switzerland – Unemployment Rate
• Eurozone – Retail Sales MoM, YoY 

Wednesday, 8 October, 2025 

• U.S. – FOMC Minutes 

Thursday, 9 October, 2025 

• U.S. – Fed Chair Powell Speech 
• U.S.  – Initial Jobless Claims 

Friday, 10 October, 2025 

• Japan – PPI MoM, YoY