The shadow of the "U.S. government shutdown" looms: Bitcoin drops to $87,000, and the cryptocurrency market faces widespread pressure

As the US government once again faces a shutdown crisis, uncertainty quickly spreads to the cryptocurrency market, with risk assets coming under broad pressure. Bitcoin continued its decline today (26th), briefly dropping to around $87,000. According to CoinGecko market data, Bitcoin fell 1.2% in the past 24 hours, trading at $87,704; Ethereum experienced a deeper decline, dropping 2.6% to $2,862. Presto Research analyst Rick Maeda pointed out that the cryptocurrency market’s downturn this week is not due to industry-specific negative news but is dominated by risk-off sentiment driven by the overall economic environment. He emphasized that the key catalyst for recent market pressure is the rapidly increasing risk of a US government shutdown. As Congress continues to stalemate over the budget and political stances, market sentiment toward risk assets has clearly become more conservative. According to the Associated Press, recent legislative friction in the US Congress has escalated, with Democratic lawmakers threatening to block funding bills for the Department of Homeland Security in protest of certain federal law enforcement actions, triggering a new round of political standoff. This deadlock has occurred just months after the longest government shutdown in US history, keeping market nerves tense and rapidly increasing political risk premiums. Kronos Research Chief Investment Officer Vincent Liu pointed out that data from decentralized prediction platform Polymarket shows that the market expects the probability of a US government shutdown has risen to 75%, mainly due to the stalemate in spending cap negotiations, with market anxiety continuing to spread. Under macroeconomic pressure, the overall sentiment in the cryptocurrency market has also shifted toward caution. Data shows that US Bitcoin spot ETF saw approximately $1.33 billion in net outflows during the week ending January 23, marking the weakest week since February 2025. Vincent Liu stated that although the large-scale capital outflows from Bitcoin spot ETFs indicate heightened risk-off sentiment, it is still observable that funds continue to allocate to industry infrastructure and leading companies, showing that long-term market confidence remains intact. Ark Invest disclosed last Friday that it increased its holdings in cryptocurrency-related stocks such as Coinbase, Bullish, and Circle, amounting to several million dollars. However, Rick Maeda from Presto Research also warned that Ark has historically favored cryptocurrency-related stocks across different market cycles, even during corrections, so its actions may not fully represent the consensus of the broader institutional investors.

Overall, despite selective positioning in some crypto concept stocks, ETF capital flows suggest that institutional demand is indeed weakening at the margin.

Looking ahead, analysts generally believe that the overall economic situation will continue to dominate the direction of cryptocurrencies. This week’s market focus will be on the Federal Reserve’s (Fed) interest rate decision and US Producer Price Index (PPI) data.