Bitcoin rises to $105,000 as deal to reopen the government moves through Congress: CNBC Crypto World

Key Concepts

• Bitcoin Price Drivers: Government shutdown resolution, Federal Reserve liquidity policies (stopping Quantitative Tightening, rate cuts), fiscal deficits, Bitcoin's value proposition as a scarce, hard asset, hedge against currency debasement.
• Crypto-Backed Mortgages: Trump administration's initiative to incorporate digital assets into home lending, Federal Housing Finance Agency (FHFA) directive to Fannie Mae and Freddie Mac, potential impact on housing market affordability, concerns about volatility and risk.
• Crypto Treasury Companies: Role in improving access to Bitcoin for institutional investors, strategies involving Bitcoin-backed securities and credit instruments, MNAV (Market Value to Net Asset Value) as an entry point indicator.
• Bitcoin vs. Ether (ETH) and Altcoins: Bitcoin's increasing separation as an institutional-grade crypto asset, differences in technology, security assurances, consensus mechanisms (Proof-of-Work vs. Proof-of-Stake), track record, security, and liquidity.
• Global Crypto Market: Importance of considering global central bank rate cuts and instability of fiat currencies outside the US dollar, growth opportunities in regions like Latin America.
• Bitcoin as a Store of Value vs. Medium of Exchange: Current perception of Bitcoin as a store of value, potential for future adoption as a payments technology, comparison with stablecoins and their inherent debasement risk.

Bitcoin's Rise Amidst Government Shutdown Resolution

Bitcoin experienced a rise, climbing over 1% to the $15,000 level as of noon Eastern, following the Senate's passage of a deal to end the US government shutdown. Ether traded flat, while XRP surged by 8.5%. This market movement occurred as investors monitored the negotiations for a federal funding bill. A procedural measure supporting the agreement passed with a minimum of 60 votes, with eight Democratic senators breaking party lines. The deal aims to reopen the government through January, reverse federal layoffs, and include future protections for government workers. Notably, it does not include an extension of ACA credits but calls for a vote on subsidies in December. The agreement still requires a final vote in the Senate and passage by the House.

A University of Michigan survey released on Friday indicated that fears surrounding the shutdown had driven consumer sentiment to its lowest level in over three years, impacting market sentiment.

In related news, eToro shares rose by more than 8.5% around 12:15 PM after the retail trading platform reported Q3 results that exceeded expectations, driven by strong crypto trading activity. Despite this, eToro's stock has declined 27% since its May IPO.

Trump Administration's Push for Crypto-Backed Mortgages

With home prices near record highs and mortgage rates causing hesitation among buyers, the Trump administration is exploring the integration of digital assets into the home lending process. The median sales price for a house in the US is above $400,000, and the median age for first-time homebuyers has reached a record 40 years old, according to the National Association of Realtors.

Bill Py, head of the Federal Housing Finance Agency (FHFA), which oversees Fannie Mae and Freddie Mac, directed these entities to draft proposals for including crypto as assets in single-family home loan applications. While some private lenders already permit customers to list crypto assets, Fannie Mae and Freddie Mac's significant role in the US mortgage market (purchasing over 70%) means their approval would substantially tie crypto to the housing market.

How Crypto-Backed Mortgages Could Work

Experts suggest the process would be similar to current mortgage applications, where applicants would present their assets, including potentially their crypto portfolios, alongside bank statements. However, it's not expected to be a mandatory requirement for loan qualification, as banks would likely still prioritize reserves held in traditional assets like stocks, bonds, or cash. This could offer a slight advantage for individuals heavily invested in crypto.

Fannie Mae and Freddie Mac may implement guidelines, potentially including a "haircut" on the value of crypto assets when assessing their contribution to a borrower's financial standing. For instance, if an applicant claims $10 million in Bitcoin, the agencies would determine how much of that value to count towards the credit assessment.

Concerns and Legislative Efforts

Democrats in Washington have voiced concerns. Five senators, including Jeff Merkley, Elizabeth Warren, and Chris Van Hollen, sent a letter to Py requesting information on the FHFA's directive, citing the volatility of crypto compared to traditional assets and the need for public understanding of the decision-making process and its potential risks and benefits to the housing market.

One perspective shared is that while risks in the mortgage market are a valid concern, particularly in light of the 2008 financial crisis, crypto is unlikely to be the cause this time, especially if investments are risk-weighted. The emphasis is on ensuring that crypto's volatility is properly accounted for through downweighting guidelines.

Wyoming Republican Senator Cynthia Lummis has introduced the "21st Century Mortgage Act" to codify this initiative into law. The bill aims to embrace an innovative path to wealth building for young Americans who own digital assets, allowing their digital assets to be included on their balance sheets when demonstrating net worth for loan qualification.

Progress on this legislation has been delayed by the government shutdown, and with the midterms approaching, lawmakers may prioritize other issues.

Sam Callahan on Bitcoin's Price Drivers and Market Outlook

Sam Callahan, Director of Bitcoin Strategy and Research at Orange BTC, discussed the factors driving crypto prices and the outlook for the remainder of 2025.

US Politics and Federal Reserve Influence

Callahan acknowledged that US politics plays a role in the crypto narrative. However, he highlighted a more significant pivot from the Federal Reserve regarding liquidity. The Fed's stated intention to stop Quantitative Tightening (QT) and its move towards rate cuts are positive for liquidity. Coupled with ongoing multi-trillion dollar fiscal deficits, these factors strengthen Bitcoin's value proposition as a scarce, hard asset and a hedge against currency debasement. Despite recent price corrections, Bitcoin's long-term appeal in this environment remains compelling.

Crypto Treasury Companies and Institutional Access

Regarding the recent pullback in Bitcoin's price, Callahan noted a compression in the MNAV (Market Value to Net Asset Value) for crypto treasury companies. He suggested that the current MNAV of around one might represent a good entry point. These companies are crucial for improving access to Bitcoin for large pools of capital, particularly institutional investors who are restricted from buying spot Bitcoin due to investment mandates or regulations. These companies facilitate access through Bitcoin-backed securities and instruments like perpetual preferred credit or equity. Callahan anticipates continued growth and Bitcoin accumulation by these treasury companies due to their role in meeting market demand.

Bitcoin's Outperformance Potential

Callahan expects Bitcoin to outperform Ether (ETH) and other altcoins as the year concludes. He believes Bitcoin is increasingly recognized as the "institutional-grade" crypto asset due to its distinct technology, security assurances, and Proof-of-Work consensus mechanism, contrasting with the more experimental Proof-of-Stake mechanisms of other cryptocurrencies. Bitcoin's track record of never being hacked and its superior security and liquidity make it more attractive to large institutional investors. He pointed to a recent large crypto liquidation event where many altcoins lacked the liquidity necessary for significant institutional capital, unlike Bitcoin. This liquidity and security advantage, he predicts, will lead to Bitcoin separating itself from other cryptocurrencies over the next one to five years.

Overlooked Catalysts and Global Market Perspective

Callahan emphasized that investors often focus too narrowly on US markets, overlooking Bitcoin's global nature. While the Fed is cutting rates, 85% of central banks worldwide are also doing so, and many fiat currencies are less stable than the US dollar. Orange BTC's growth in Latin America, for example, is driven by the demand for Bitcoin access in regions with more unstable fiat currencies. He stressed the importance of viewing the crypto market globally.

Bitcoin as a Store of Value vs. Stablecoins

Addressing Kathy Wood's recent downward revision of her end-of-decade Bitcoin price target, Callahan acknowledged that stablecoins are taking on some payment roles previously anticipated for Bitcoin. However, he doesn't believe this poses a long-term threat to Bitcoin. While Bitcoin can evolve into a medium of exchange, particularly with the Lightning Network enabling cheap cross-border payments, it is currently primarily seen as a store of value.

He noted that Wood lowered her estimate from $1.5 million to $1.2 million. Callahan reiterated that Bitcoin remains the premier store of value asset, finding product-market fit as a long-term wealth preservation technology due to its scarcity. He anticipates Bitcoin will continue to be viewed this way for the next 5-10 years. Looking further out (20-50 years), he believes Bitcoin will also see increased adoption as a payment technology, alongside stablecoins.

Crucially, Callahan pointed out that stablecoins, while technologically advanced wrappers for fiat currencies, still face the same debasement risk. Holding stablecoins for extended periods can lead to a loss of purchasing power, unlike Bitcoin, which is designed to preserve value over time.

The segment concluded with a reminder that Crypto World will return the following day.