The government shutdown threat triggers crypto: $598 million in long positions liquidated as Bitcoin drops to $86,000

Source: Yellow Original Title: The government shutdown threat triggers crypto: $598 million in long positions liquidated as Bitcoin drops to $86,000

Original Link: Cryptocurrency markets plummeted sharply on Sunday night, New York time, as traders priced in an increasing risk of a U.S. government shutdown, amplifying macroeconomic uncertainty and triggering a wave of leveraged liquidations in digital assets.

What happened

Polymarket prediction market data showed that traders assigned a 79% probability to another U.S. government shutdown before the January 31 funding deadline.

The sudden increase in shutdown probabilities coincided with broad risk-off movements in crypto markets, as investors reacted to political deadlock in Washington and the possibility of federal operational disruptions.

The shutdown risk shifts from political noise to market signal

U.S. government shutdowns occur when Congress fails to pass appropriations legislation before funding expires, forcing non-essential federal agencies to halt operations.

Although shutdowns are usually resolved after brief interruptions, markets tend to react quickly to the risk itself rather than the final outcome.

The current standoff centers on disagreements over federal spending priorities before the deadline, and negotiations have yet to produce a clear compromise. According to Associated Press, lawmakers remain divided on key funding provisions, increasing the likelihood of a government funding interruption if an agreement is not reached in time.

Historically, shutdown threats have dampened investor sentiment by delaying economic data releases, disrupting government services, and increasing uncertainty around fiscal policy—factors that tend to pressure risk assets overall.

Bitcoin, Ether, and major tokens trade lower

In this context, leading cryptocurrencies retreated.

Data from CoinGecko showed Bitcoin (BTC) trading around $86,751, down approximately 3.2% in the last 24 hours and nearly 9% over the past week.

Ethereum (ETH) fell more sharply, trading near $2,814, a decline of about 4.5% for the day and over 15% in seven days.

Other large-cap tokens also declined, with BNB near $862, XRP around $1.83, and the total crypto market capitalization decreasing along with prices.

Liquidations increase as leverage unwinds

The mass sell-off was accompanied by intense liquidation activity.

According to Coinglass data, total cryptocurrency liquidations in the last 24 hours reached approximately $652 million.

Long positions accounted for the majority of losses, with $600 million, while short liquidations totaled around $52 million.

This imbalance suggests that the bearish move caught bullish traders off guard, forcing them to quickly reduce leverage as prices fell.

Analysts note that periods of high macroeconomic uncertainty, especially related to fiscal policy and government stability, tend to expose excessive leverage in crypto markets more rapidly than in traditional assets.

The longest shutdown in U.S. history lasted 43 days at the end of 2025, ending in November but leaving behind delayed economic data and interrupted services.