The U.S. federal government stands on the brink of a midnight shutdown as Republicans and Democrats remain deadlocked over budget negotiations, fueling market uncertainty. Bitcoin, which briefly rallied after the weekend, reversed course and dipped below $114,000 on Tuesday, trading at $113,922.15 at press time — a 0.13% decline over 24 hours but still up 1.83% for the week.
Budget Stalemate in Congress
Despite holding a majority in both chambers, Republicans failed to advance their temporary funding bill in the Senate, falling short of the 60 votes needed to overcome a filibuster. Democrats countered with their own proposal, demanding an extension of health insurance tax credits and a reversal of Medicaid cuts enacted earlier this year by the Trump administration. That bill also failed. Both sides blame each other as the midnight deadline looms, and if no deal is reached, this would mark the 15th government shutdown since 1980.
The last shutdown occurred in 2018 during Donald Trump’s first term and lasted 35 days, costing an estimated $3 billion in lost economic activity. Senate Majority Leader John Thune warned on Tuesday, “Senate Democrats have a binary choice to make: they can vote for the clean continuing resolution to keep the government open, just as they did 13 times when Biden was in office, or they can shut down the government.”
Bitcoin and Stock Markets Under Pressure
The specter of a shutdown weighed on both equities and cryptocurrencies. Bitcoin’s 24-hour range stretched from $112,740.56 to $114,836.62, reflecting heightened volatility. Trading volume slipped 4.1% to $57.86 billion, while total market capitalization edged down 0.29% to $2.26 trillion. Notably, Bitcoin dominance rose 0.51% to 59.14%, suggesting a flight to relative safety within the crypto space as altcoins underperformed.
Derivatives and Liquidations Reveal Short Bias
Coinglass data shows total Bitcoin futures open interest declined 3.19% to $80.25 billion, indicating deleveraging ahead of the uncertainty. Over the past 24 hours, liquidations totaled $47.65 million, with short liquidations at $29.43 million — significantly outpacing long liquidations of $18.22 million. The imbalance suggests that while some short positions were squeezed during brief upward wicks, overall market sentiment remains tilted bearish.
Historically, U.S. government shutdowns are resolved within days or weeks, but the immediate impact on risk assets can be consequential. A protracted closure could disrupt Federal Reserve liquidity operations and further dampen appetite for volatile assets like Bitcoin. Traders are now watching for any breakthrough in negotiations, while some investors are moving coins to cold storage to avoid exchange counterpary risk.
For now, Bitcoin remains in a holding pattern below the psychological $114,000 level, with the next major support near $112,000. Until the budget impasse is resolved, further downside pressure is likely to persist.