Bitcoin Experiences Sharp Decline Amidst US Government Shutdown Threats and Trade Tensions
The leading cryptocurrency, Bitcoin, has recently experienced a significant correction following massive liquidations of leveraged positions. This comes in the context of increased risk aversion due to the threat of a US government shutdown and new trade tensions instigated by President Trump.
Bitcoin’s Current Market Position
Bitcoin is currently trading at $89,000, marking a weekly decline of over 6% in its value. The cryptocurrency managed to leverage near $89,500 following a surge triggered by Trump’s comments on Greenland. However, Bitcoin has now fallen below $88,000 as $60 million in leveraged long positions were liquidated within 30 minutes due to the emergence of a new risk.
Increased Probability of US Government Shutdown
The new risk comes in the form of an increased probability of another US government shutdown and a threat to impose 100% tariffs on Canada. Cryptocurrencies are struggling to recover and are moving further away from the highs they achieved in 2025, around $125,000.
Several US senators announced on Saturday that they will vote against a budget bill next week following the killing of a second American in Minneapolis by federal agents. This event has increased the likelihood of a government shutdown.
Government Shutdown Explained
Known as a government shutdown, this suspension occurs when Congress fails to approve the federal budget or a temporary extension in time. By law, the government cannot continue to fund many of its operations. Federal state funding, including the Department of Homeland Security (DHS), expires on January 31st.
Political Discord Intensifies
The death that intensified the discord was that of Alex Pretti, a 37-year-old Minneapolis nurse. His death comes just three weeks after another Minnesota resident, Renee Good, was shot dead by a federal agent. Thousands of Immigration and Customs Enforcement (ICE) officers have already been deployed in Minneapolis, a Democrat-governed city, to advance the massive immigration raids ordered by the Trump administration.
The House of Representatives, controlled by the Republicans, approved funding until September, but it still needs Senate approval, and the situation in Minneapolis has disrupted the political landscape.
Implications of a Government Shutdown
The longest government shutdown in US history, in which hundreds of thousands of federal employees were furloughed except those considered essential, ended last November after 43 days. In this context, technical signals such as the formation of a death cross point to further weakness, while new data increases the likelihood of a Bitcoin drop towards $70,000.
100% Tariffs on Canada
US President Donald Trump announced on Saturday that he would impose a 100% tariff on Canada if it reaches a trade agreement with China. He warned Canadian Prime Minister Mark Carney that such a deal would put his country at risk.
“China will eat Canada alive, completely devour it, including the destruction of its businesses, social fabric, and general way of life,” Trump wrote on Truth Social. “If Canada makes a deal with China, it will be immediately hit with a 100% tariff against all Canadian goods and products entering the US.”
Conclusion
The current political and economic climate has had a significant impact on the value of Bitcoin. The threat of a US government shutdown and trade tensions with Canada have contributed to a sharp decline in the cryptocurrency’s value. As the situation continues to unfold, investors and traders will be closely monitoring the market for potential opportunities or risks.
