The global crypto markets fell sharply over the weekend, wiping out approximately $100 billion from the overall market capitalization. This comes as concerns about a potential US government shutdown deepened, prompting selling in digital crypto assets.
As tensions in the crypto market escalated further, Senate Democrats threatened to block funding packages if they discovered they included funding for the Department of Homeland Security (DHS), a US federal executive department responsible for public security, including border management.
Notably, this threat was issued against the backdrop of recent reputable reports of a case where federal agents shot and killed a man in Minneapolis, Minnesota’s largest city.
Concerning the Senate Democrats’ warning, Chuck Schumer, the senior US senator from New York and the Senate Democratic Leader, alleged that, “Democrats wanted sensible changes in the Department of Homeland Security spending bill, but because Republicans won’t challenge President Trump, the DHS bill fails to address ICE’s issues. I will vote no.”
To underscore the urgency of the situation, Schumer emphasized that Senate Democrats will oppose advancing the appropriations bill if it includes DHS funding.
The crypto market faces one of the most severe downturns in history
As the crypto market faces a tough time due to escalating global conflicts, data from TradingView showed that its capitalization dropped from a previous peak of $2.97 trillion to $2.87 trillion in just 6.5 hours by Sunday, January 25, at 9:30 pm UTC.
Consequently, Bitcoin’s price declined by 3.4% in the past 24 hours. As the dominant cryptocurrency, BTC’s price movement affected other cryptocurrencies, such as Ether, which declined by about 5.3% during the same period.
Apart from this incident, data from Gate, a top-tier, centralized cryptocurrency exchange, disclosed that leveraged crypto positions valued at over $360 million were liquidated in the last 24 hours, with $324 million in long positions closed.
On the other hand, traders on major prediction markets, Kalshi and Polymarket, placed their bets anticipating an 80% probability that a US government shutdown would occur by Saturday, January 31.
To break this probability down, sources noted that the likelihood of another shutdown by January 31 on prediction market Kalshi skyrocketed from below 10% on Saturday, January 24, to 78.6% on Sunday, January 25. For Polymarket, its prediction also surged to 80%.
Just after making this prediction, traders began to panic amid deepening recession fears, following US President Donald Trump’s earlier assertion that he might raise tariffs on Canada to 100% if the country strikes an agreement with China.
Furthermore, reports stated that the US military sent warships to the Middle East amid escalating tensions with Iran. Crypto investors recall how prices behave during US government shutdowns.
Bitcoin’s price sharply declined amid last year’s US government shutdown
Regarding the last US government shutdown, sources noted that the federal government was closed from October 1 to November 12 last year. This shutdown resulted from the Congress’s decision to delay the approval of funding for the 2026 fiscal year.
As a result of the record 43-day shutdown, Bitcoin’s price sharply declined from its all-time high record of $126,080 to $100,000.
Meanwhile, it is worth noting that ongoing conflicts in Washington and the October 10 crypto market crash partly drove this decline. The key driver of this market crash was Trump’s tariff threats against China.
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Source: https://www.cryptopolitan.com/crypto-market-loses-100b/