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Crypto markets erased roughly $100 billion in value over a six-hour span on Sunday as the probability of a U.S. government shutdown surged to 80% on prediction platforms, triggering a cascade of liquidations among leveraged traders.
The sell-off intensified after Senate Democratic Leader Chuck Schumer announced Democrats would block any appropriations bill that includes Department of Homeland Security funding, raising the prospect of a partial government shutdown by January 31.
Senate Democratic Leader Chuck Schumer signaled firm opposition to the DHS funding package, stating:
“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.”
Schumer added that Senate Democrats would oppose advancing any appropriations bill that includes DHS funding under its current structure, reinforcing investor concerns over a prolonged political standoff.
Market data showed the crypto market liquidation unfolded rapidly.
According to TradingView, total crypto market capitalization fell from approximately $2.97 trillion to $2.87 trillion in just 6.5 hours by Sunday evening, January 25, at around 21:30 UTC.
Bitcoin declined roughly 3.4% over the 24-hour period, while Ether fell by more than 5%, amplifying losses across the broader market.
As the largest digital asset by market value, Bitcoin’s downward move dragged altcoins lower, triggering forced liquidations among highly leveraged traders.
Data from centralized exchange Gate indicated that more than $360 million in leveraged crypto positions were liquidated within 24 hours, with approximately $324 million coming from long positions.
Analysts say the imbalance underscores how bullish positioning left traders vulnerable once prices began to slide.
This latest crypto market liquidation unfolded against a backdrop of heightened macro uncertainty, as investors weighed the potential impact of stalled fiscal negotiations, geopolitical developments, and trade policy risks.
Expectations of a US government shutdown surged sharply on prediction platforms, further fueling the crypto market liquidation.
Traders on Kalshi and Polymarket priced in roughly an 80% probability that a shutdown would occur by Saturday, January 31.
On Kalshi, the implied probability of a shutdown jumped from below 10% on January 24 to nearly 78.6% by January 25.
Polymarket reflected a similar surge, with traders rapidly adjusting positions as political rhetoric hardened in Washington.
The growing shutdown risk coincided with renewed fears of broader economic disruption.
Market participants also reacted to comments from US President Donald Trump, who recently warned he could impose tariffs of up to 100% on Canada if it finalized certain trade agreements with China.
Combined with reports of increased US military deployments to the Middle East amid tensions with Iran, investors moved quickly to cut exposure to risk assets.
Historically, periods of fiscal uncertainty have been associated with heightened crypto market liquidation, as digital assets increasingly trade in tandem with broader macro risk sentiment rather than as isolated hedges.
Memories of the previous US government shutdown continue to weigh on investor psychology. The last shutdown lasted 43 days, from October 1 to November 12, after Congress failed to approve funding for the 2026 fiscal year on time.
During that period, Bitcoin experienced a steep correction, falling from a record high of approximately $126,080 to near $100,000.
Analysts at the time attributed the decline to a mix of political uncertainty, tariff threats against China, and broader market volatility.
That episode reinforced how sensitive crypto markets have become to US fiscal policy disputes.
With leveraged participation now significantly higher than in previous cycles, analysts warn that any prolonged shutdown could intensify crypto market liquidation, particularly if risk-off conditions persist across equities and credit markets.
While negotiations in Washington remain fluid, investors are bracing for further volatility ahead of the January 31 deadline.
Until greater clarity emerges, market participants say downside risks tied to policy uncertainty and forced deleveraging remain elevated.
As one of the most macro-driven sell-offs in recent months, the latest crypto market liquidation highlights how deeply digital assets are now intertwined with political and economic developments beyond the blockchain.
