The cryptocurrency market plummeted on Sunday evening, New York time, as the perception of increasing risk of a U.S. government shutdown was reflected in prices. This amplified macro uncertainty and triggered a chain liquidation of leverage-based positions across digital assets.
What happened?
According to the prediction market data from Polymarket, traders assessed the probability of another U.S. government shutdown before the budget deadline on January 31 at 79%.
The sharp rise in the possibility of a shutdown reflects investors' concerns about political deadlock in Washington and the potential for the federal government to cease operations, coinciding with a risk-off flow across the cryptocurrency market.
Shutdown risk, market signals amid political noise
A U.S. government shutdown occurs when Congress fails to pass a budget bill on time, resulting in the cessation of funding, and in this case, the operations of non-essential federal government agencies are halted.
Shutdowns are usually resolved after a brief period of disruption, but markets tend to preemptively react to the mere possibility of 'risk occurring' rather than the outcomes.
The current standoff arises from disagreements over federal spending priorities ahead of a deadline, with negotiations failing to yield a clear compromise.
According to the AP, lawmakers remain sharply divided over key budget provisions, heightening the likelihood of a government funding cutoff if an agreement fails to be reached by the deadline.
Historically, the threat of shutdowns has dampened investor sentiment through delays in economic indicator announcements, disruptions to government services, and increased uncertainty regarding fiscal policy. These factors tend to apply pressure on overall risk assets.
Bitcoin, Ethereum, and major tokens decline
In this environment, the prices of major cryptocurrencies fell collectively.
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According to CoinGecko data, Bitcoin (BTC) is trading at around $86,751, down about 3.2% over 24 hours and around 9% over the week.
Ethereum (ETH) experienced a larger drop, trading at around $2,814, down approximately 4.5% for the day and more than 15% over seven days.
Other major market cap tokens also fell. BNB traded at around $862, XRP around $1.83, and with the price drop, the total market cap of cryptocurrencies also decreased.
Liquidation surge due to leverage unwinding
This sell-off was accompanied by large-scale liquidations.
According to Coinglass data, the total liquidation amount in the cryptocurrency market over the past 24 hours reached approximately $650 million.
Among these, long positions accounted for about $600 million, while the liquidation size of short positions was around $52 million.
This imbalance suggests that price declines have unexpectedly overwhelmed bullish traders, forcing a rapid reduction in leverage alongside the price drop.
Analysts point out that particularly during periods of increasing macro uncertainty tied to fiscal policy and government operational stability, excessive leverage in the cryptocurrency market tends to be exposed more quickly than in traditional assets.
The longest shutdown in U.S. history lasted 43 days from late 2025 and ended in November, leaving behind the aftermath of delayed economic indicator announcements and various service disruptions.
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