Early Sunday, the cryptocurrency market experienced a rapid decline, losing about $100 billion in value as traders reacted to the looming threat of a potential US government shutdown.
Senate Democrats have indicated their intention to obstruct a funding bill if it allocates resources to the Department of Homeland Security (DHS). This follows a tragic event in which federal agents fatally shot a man in Minneapolis.
“Democrats sought common sense reforms in the DHS spending bill, but because of Republicans’ refusal to stand up to President Trump, the DHS bill is woefully inadequate to rein in the abuses of ICE. I will vote no,” said Senate Democrat Leader Chuck Schumer.
Translation: Democrats proposed reasonable changes to the DHS funding bill, but the bill is insufficient due to Republican resistance.
TradingView reports indicated a drop in the total cryptocurrency market capitalization from $2.97 trillion to $2.87 trillion, leading to a 3.4% decrease in Bitcoin’s price in 24 hours. Altcoins, particularly Ethereum, are bearing the brunt of this market volatility, with a decline of about 5.3%.
Additionally, approximately $360 million in leveraged positions have been liquidated in just one day, confirming the market’s instability.
Surge in Government Shutdown Concerns
Prediction markets Kalshi and Polymarket show that the odds of a government shutdown by January 31 have substantially risen, now sitting at 80%, up from under 10% just days prior.
Recent statements from US President Donald Trump have further alarmed traders, following his threat to increase tariffs on Canada whilst the US military reinforces its presence in the Middle East amid heightened tensions with Iran.
Historical Context
Cryptocurrency investors are mindful of the impact government shutdowns can have on market prices. During the last significant shutdown lasting 43 days from October 1 to November 12, Bitcoin’s price plummeted from an all-time high of $126,080 to below $100,000.
Continuing this trend, gold has outperformed Bitcoin as investors seek refuge in traditional assets amidst growing economic uncertainty. The Crypto Fear & Greed Index has also dipped into the ‘Extreme Fear’ zone, indicating investor sentiment is at a low.
For further details, you can refer to various resources including the recent market analyses and updates.
