BITCOIN fell below the $87,000 mark over the weekend, extending a sharp pullback as investors reacted to mounting fears of a potential U.S. government shutdown and renewed tariff threats from President Donald Trump targeting major trading partners.
On Sunday, the leading cryptocurrency dropped to around $86,000 on Bitstamp, wiping out its gains for 2026. The decline was exacerbated by heavy selling from large holders in thin market conditions, Daily Forex reported.
The latest move pushed Bitcoin 32 percent below its all-time high of $126,200 recorded on October 6, while triggering widespread liquidations in the derivatives market.
Data showed that more than $600 million worth of short positions were liquidated, with Bitcoin alone accounting for $226 million. Ether followed closely, with $204 million in short liquidations.
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Overall, liquidations across both long and short positions reached $765.71 million, reflecting heightened volatility and investor panic.
Figures from CoinGlass indicated strong buying interest clustered between $84,800 and $86,000 on the daily chart, while additional bid orders were stacked down to the $82,200 level.
This pattern suggests Bitcoin could still dip further to clear liquidity in those zones before attempting a more sustainable rebound.
U.S. shutdown fears deepen market anxiety
Concerns over a possible U.S. government shutdown have intensified economic uncertainty, adding pressure to Bitcoin’s price. Lawmakers remain deadlocked over budget funding, raising the likelihood of a partial shutdown that could disrupt government operations and unsettle financial markets.
The standoff comes at a sensitive time for global markets already grappling with fragile macroeconomic conditions. A shutdown could stall key economic data releases, delay regulatory processes for crypto initiatives, and weaken consumer sentiment. Historically, Bitcoin has tended to struggle during periods of U.S. fiscal instability, including past debt ceiling crises.
Institutional sentiment also weakened, as U.S.-based spot Bitcoin ETFs recorded net outflows of $1.7 billion last week, signaling reduced confidence among large investors.
Coinbase’s Chief Executive Officer, Mr Brian Armstrong, weekend, noted that major banks increasingly saw crypto as a direct threat, but a shutdown could further slow adoption by complicating regulatory and compliance frameworks. In a worst-case scenario, oversight of government-backed stablecoins could be frozen, potentially tightening liquidity across the crypto ecosystem.
According to Mr Armstrong, a top executive at one of the world’s 10 largest banks told him during the World Economic Forum (WEF) in Davos, Switzerland, that crypto had become the institution’s ‘number one priority’ and an ‘existential’ concern.
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Speaking on the sidelines of the annual gathering, Mr Armstrong said discussions with financial executives showed a sharp change in attitude from traditional institutions. Rather than dismissing crypto, many are now actively exploring how to integrate it into their operations.
In a post on X, Armstrong said most of the banking leaders he met were no longer sceptical. “Most of them are actually very pro crypto and are leaning into it as an opportunity,” he wrote, though he declined to name the bank or executive involved.
He added that the shift reflected growing pressure on banks to adapt, especially as regulators across major economies moved closer to setting clearer rules for digital assets.
Mr Armstrong said tokenisation and stablecoins dominated conversations at Davos, as both technologies threatened to reduce the role of traditional financial intermediaries.
He argued that tokenised assets could allow investors to buy and sell equities, credit and other financial products directly on blockchain networks, without relying on banks or legacy clearing systems.
This could eventually enable global asset managers or fintech firms to move value instantly using stablecoins, bypassing conventional payment rails and middlemen
Attention is now shifting to the Federal Reserve’s FOMC meeting on January 27 and 28. Futures markets are currently pricing in just a 2.8 percent chance of a 0.25 percent rate cut, and a shutdown could further muddy the transmission of monetary policy.
As Bitcoin’s correlation with traditional assets rises, it has become more exposed to domestic economic and political shocks.
