Cryptocurrency Markets Lose $100B Amid Democratic Party's Government Shutdown Warning
Democratic senators have issued warnings about blocking funding legislation containing Department of Homeland Security appropriations, sparking concerns among cryptocurrency traders about a potential United States government shutdown.
Approximately $100 billion in value evaporated from cryptocurrency markets in the late hours of Sunday, with fears surrounding a possible partial shutdown of the United States government triggering widespread sell-offs among investors and traders.
Democratic senators issued warnings about blocking the funding package should it contain appropriations for the Department of Homeland Security, the agency responsible for overseeing Immigration and Customs Enforcement, following an incident on Saturday in which federal agents fatally shot an individual in Minneapolis.
"Democrats sought common sense reforms in the Department of Homeland Security 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,"
Senate Democrat Leader Chuck Schumer
Schumer went on to state, "Senate Democrats will not provide the votes to proceed to the appropriations bill if the DHS funding bill is included."
According to data from TradingView, the overall cryptocurrency market capitalization experienced a decline from $2.97 trillion down to $2.87 trillion within a six-and-a-half-hour timeframe ending Sunday at 9:30 pm UTC, resulting in Bitcoin (BTC) declining by 3.4% across the previous 24-hour period.
Alternative cryptocurrencies experienced even more severe losses, with Ether (ETH) falling 5.3% during the same one-day timeframe.
Additionally, more than $360 million in leveraged cryptocurrency positions were liquidated over the past 24 hours, with long positions accounting for $324 million of those liquidations, according to data provided by Gate.
Odds of shutdown by end of January rise
Participants placing wagers on the prediction market platforms Kalshi and Polymarket have pushed the probability of a US government shutdown occurring by Saturday, Jan. 31, to as high as 80%.
The probability of a government shutdown by Jan. 31 on Kalshi jumped from under 10% on Saturday to reach 78.6% by Sunday, while the odds displayed on Polymarket demonstrated a comparable increase to 80%.
Compounding traders' anxieties about a potential market decline were statements from US President Donald Trump threatening to impose tariffs as high as 100% on Canada should the nation negotiate a deal with China, along with the US military's deployment of warships to the Middle East in response to escalating tensions with Iran.
Crypto prices fell during the last shutdown
Cryptocurrency market participants maintain recent recollections of how digital asset prices performed throughout previous US government shutdowns.
Throughout the record-breaking 43-day US government shutdown that extended from Oct. 1 through Nov. 12, Bitcoin experienced a decline from its all-time peak of $126,080 down to levels beneath $100,000, a drop attributed partially to extended political disagreements in Washington but also influenced by the Oct. 10 cryptocurrency market collapse, which was partly triggered by Trump's tariff-related threats directed at China.
Following Oct. 10, the performance of gold has significantly exceeded that of Bitcoin, indicating that the majority of investors are continuing to prefer traditional safe-haven assets during periods of elevated geopolitical and macroeconomic uncertainty.
In the meantime, the Crypto Fear & Greed Index, which monitors Bitcoin and broader cryptocurrency market sentiment, declined by five points on Monday to register 20 out of 100, representing the sixth consecutive day remaining within the "extreme fear" territory.