Crypto Market Loses $100 Billion
Political uncertainty in the US and rising geopolitical tensions triggered a sharp sell-off across cryptocurrencies
Around $100 billion vanished from the cryptocurrency market within just a few hours on Sunday evening. The primary driver was growing political uncertainty in the United States, coupled with renewed fears of a partial government shutdown.
Investor sentiment deteriorated after Democratic senators signaled they could block the federal budget bill if it included funding for the Department of Homeland Security. The dispute centers on financing for the agency, which oversees, among others, ICE. Senate Democratic Leader Chuck Schumer announced he would vote against the proposal, calling it insufficient. As a result, markets began pricing in the risk of political gridlock.
Data from TradingView shows that total crypto market capitalization fell from $2.97 trillion to $2.87 trillion in roughly six and a half hours. Bitcoin declined 3.4% over 24 hours, while Ether dropped 5.3%, with losses especially pronounced among altcoins.
The sell-off was accompanied by a wave of forced liquidations in leveraged positions. In just one day, positions worth more than $360 million were wiped out, including $324 million in long bets. This highlights how abruptly investors reacted to the worsening market mood.
Additional pressure came from rising expectations of a US government shutdown. On prediction markets Kalshi and Polymarket, the probability of such a scenario occurring by Saturday, January 31, surged to around 80%, up from less than 10% just a day earlier.
Geopolitical tensions further weighed on sentiment. US President Donald Trump threatened to raise tariffs on Canada to 100% if the country were to strike a trade deal with China. At the same time, the United States deployed warships to the Middle East amid escalating tensions involving Iran.
The crypto market still remembers its reaction during the previous US government shutdown. During the record 43-day administrative paralysis, which lasted from October 1 to November 12, Bitcoin’s price fell from $126,080 to below $100,000. That period also coincided with earlier market shocks, compounding the downturn.
