The crypto market is poised for a tumultuous weekend as uncertainty looms over a potential U.S. government shutdown, now projected to have a 76.5% likelihood according to Polymarket. This situation arises as key events unfold, including the Federal Open Market Committee (FOMC) interest rate decision, Jerome Powell”s speech, the release of Producer Price Index (PPI) inflation data, and an impending vote on crucial crypto market structure legislation.
The stakes are high as Congress approaches a funding deadline on January 30. A $1.2 trillion funding package has successfully passed the House, yet it requires Senate approval by midnight. If lawmakers fail to reach an agreement, critical agencies such as the Department of Homeland Security (DHS), Federal Emergency Management Agency (FEMA), and Transportation Security Administration (TSA) could see non-essential operations suspended. Such a shutdown would result in non-essential workers being sent home without pay, while essential personnel would continue to work, receiving compensation at a later date.
The Senate”s ability to pass the funding bill is complicated; it requires a minimum of 60 votes. Currently, Republicans hold 53 seats, while Democrats and independent allies command 47, creating a precarious voting landscape. Recent events, including protests sparked by the fatal shooting of a nurse by federal immigration agents in Minneapolis, have escalated tensions. This incident has amplified calls for accountability and has added political pressure on lawmakers as they negotiate funding and federal agency operations.
Historically, government shutdowns have led to heightened volatility in the cryptocurrency markets. The last significant shutdown lasted for nearly 43 days and concluded in November. During that period, cryptocurrencies experienced considerable fluctuations, though not a complete collapse. Currently, the market”s apparent inaction stems from political uncertainty, compounded by the potential for key economic data, such as job and inflation reports, to be delayed. In the previous shutdown, Bitcoin witnessed a 9% drop, moving from approximately $103,000 to $94,000, while altcoins suffered losses ranging from 12% to 25% due to diminished liquidity.
If the U.S. government indeed shuts down again, the cryptocurrency market is likely to face another short-term downturn, reflecting traders” apprehension and the ongoing loss of market visibility.
