Cryptocurrency markets plummeted on Sunday evening, New York time, as traders factored in a growing risk of a U.S. government shutdown, which amplified macroeconomic uncertainty and triggered a wave of liquidations on leveraged products across digital assets.
What happened
Data from the prediction market Polymarket showed that traders assigned a 79% probability to a new U.S. government shutdown before the funding deadline of January 31.
The surge in shutdown probability coincided with a broad risk-off movement across crypto markets, with investors reacting to the political deadlock in Washington and the prospect of dysfunction in federal services.
The risk of shutdown shifts from political noise to market signal
U.S. government shutdowns occur when Congress fails to pass appropriations bills before funding expires, forcing non-essential federal agencies to halt operations.
Even though these standoffs are often resolved after short interruptions, markets tend to react in advance to the risk itself rather than the final outcome.
The current standoff revolves around disagreements regarding federal spending priorities as the deadline approaches, with negotiations failing to yield a clear compromise.
According to the Associated Press, lawmakers remain divided on key funding items, increasing the likelihood of a government funding interruption if no agreement is reached in time.
Historically, threats of shutdown weigh on investor sentiment by delaying the release of economic data, disrupting public services, and heightening uncertainty around fiscal policy, all of which exert general pressure on risk assets.
Bitcoin, Ether, and major tokens down
In this context, major cryptocurrencies retraced.
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CoinGecko data shows Bitcoin (BTC) around $86,751, down about 3.2% over 24 hours and nearly 9% over the week.
Ethereum (ETH) dropped more sharply, trading around $2,814, down about 4.5% on the day and over 15% over seven days.
Other large-cap tokens also declined, with BNB near $862, XRP around $1.83, and the total crypto market capitalization sliding alongside falling prices.
Liquidations surge as leverage unwinds
The massive sell-off was accompanied by significant liquidation activity.
According to Coinglass data, the total crypto liquidations over the last 24 hours reached about $652 million.
Long positions accounted for the majority of losses, totaling $600 million, while short liquidations amounted to about $52 million.
This imbalance suggests that the downward movement caught bullish traders off guard, forcing them to deleverage quickly as prices fell.
Analysts point out that periods of heightened macroeconomic uncertainty, especially when linked to fiscal policy and government stability, tend to expose excess leverage in crypto markets more quickly than in traditional assets.
The longest such shutdown in U.S. history lasted 43 days at the end of 2025, ending in November but leaving behind a legacy of delayed economic data and disrupted services.
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