Cryptocurrency markets sold off sharply on Sunday evening New York time as traders priced in a rising risk of a U.S. government shutdown, amplifying macro uncertainty and triggering a wave of leveraged liquidations across digital assets.
What Happened
Prediction market data from Polymarket showed traders assigning a 79% probability to another U.S. government shutdown before the January 31 funding deadline.
The spike in shutdown odds coincided with broad risk-off moves across crypto markets, as investors reacted to political gridlock in Washington and the prospect of disrupted federal operations.
Shutdown Risk Moves 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.
While shutdowns are often resolved after short disruptions, markets tend to react early to the risk itself rather than the outcome.
The current standoff centers on disagreements over federal spending priorities ahead of the deadline, with negotiations failing to produce a clear compromise.
According to Associated Press, lawmakers remain divided on key funding provisions, increasing the likelihood of a lapse in government funding if no agreement is reached in time.
Historically, shutdown threats have weighed on investor sentiment by delaying economic data releases, disrupting government services, and raising uncertainty around fiscal policy, factors that tend to pressure risk assets broadly.
Bitcoin, Ether And Major Tokens Trade Lower
Against that backdrop, major cryptocurrencies moved lower.
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CoinGecko data showed Bitcoin (BTC) trading around $86,751, down roughly 3.2% over the past 24 hours and nearly 9% over the past week.
Ethereum (ETH) fell more sharply, trading near $2,814, down about 4.5% on the day and more than 15% over seven days.
Other large-cap tokens also declined, with BNB trading near $862, XRP around $1.83, and the broader crypto market capitalization sliding alongside falling prices.
Liquidations Surge As Leverage Unwinds
The sell-off was accompanied by heavy liquidation activity.
According to Coinglass data, total crypto liquidations over the past 24 hours reached approximately $652 million.
Long positions accounted for the majority of losses at $600 million, while short liquidations totaled about $52 million.
The imbalance suggests the move lower caught bullish traders off guard, forcing rapid deleveraging as prices fell.
Analysts note that periods of heightened macro uncertainty, particularly those tied to fiscal policy and government stability, tend to expose excess leverage in crypto markets more quickly than in traditional assets.
The longest such shutdown in U.S. history lasted 43 days in late 2025, ending in November but leaving a legacy of delayed economic data and disrupted services.
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