Government Shutdown Threat Wipes $100 Billion from Crypto Market

TLDR

• The crypto market lost around $100 billion on Sunday as political uncertainty over a US government shutdown triggered selloffs
• Senate Democrats threatened to block a funding bill that includes Department of Homeland Security money, with Polymarket showing 80% odds of shutdown by January 31
• Bitcoin fell 3.4% to below $88,000 while Ethereum dropped 5.3%, with over $360 million in leveraged positions liquidated
• Traders are also monitoring the Federal Reserve’s rate decision and earnings from major tech companies including Microsoft, Meta, and Apple
• The Crypto Fear & Greed Index remained in “extreme fear” territory for six straight days at 20 out of 100

The cryptocurrency market shed approximately $100 billion in value over the weekend as political tensions in Washington raised fears of another US government shutdown. Bitcoin fell below $88,000 while most major tokens posted losses.

Senate Democratic Leader Chuck Schumer announced his party would block a funding package if it includes money for the Department of Homeland Security. The move came after federal agents shot and killed a man in Minneapolis on Saturday.

The crypto market cap dropped from $2.97 trillion to $2.87 trillion in six and a half hours on Sunday. Bitcoin fell 3.4% over 24 hours while Ethereum declined 5.3%.

Over $360 million in leveraged crypto positions were liquidated in the past day. Long positions accounted for $324 million of those liquidations.

Prediction Markets Show High Shutdown Odds

Traders on prediction markets Kalshi and Polymarket now estimate an 80% chance of a government shutdown by January 31. Odds on Kalshi jumped from below 10% on Saturday to 78.6% on Sunday.

Weekend trading volumes were lighter than usual. The price movements reflected positioning adjustments rather than major news developments.

Traders are also watching for possible intervention in the Japanese yen. Prime Minister Sanae Takaichi warned against “abnormal” market moves after the yen reversed sharply on Friday.

President Donald Trump added to market concerns by threatening to raise tariffs on Canada to 100% if the country makes a deal with China. The US military deployed warships to the Middle East amid rising tensions with Iran.

The Crypto Fear & Greed Index fell five points on Monday to 20 out of 100. The index has remained in “extreme fear” territory for six consecutive days.

Fed Decision and Tech Earnings Ahead

Investors are preparing for a busy week of economic events. The Federal Reserve will announce its first interest rate decision of the year.

The central bank is expected to keep rates unchanged. Traders will watch Chairman Jerome Powell’s press conference for clues about future policy.

Several major technology companies report earnings this week. Microsoft, Meta Platforms, Tesla, and Apple are among the firms releasing results.

Market participants will look for comments about artificial intelligence trends and business outlooks. Bitcoin often moves with tech stocks as both are considered risk assets.

During the last US government shutdown from October 1 to November 12, Bitcoin fell from its all-time high of $126,080 to below $100,000. That decline was driven partly by political disagreements and the October 10 market crash.

Gold has outperformed Bitcoin since October 10. This suggests investors continue favoring traditional safe-haven assets during periods of uncertainty.

Bitcoin traded around $87,800 in US afternoon hours on Sunday. Solana, XRP, and Cardano each posted losses between 3% and 5%.

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