Crypto Market Takes a Hit Amid Political Chaos

The crypto market experienced a significant downturn late on Sunday, with a $100 billion drop. This was driven by concerns over a potential US government shutdown.

Market Impact

• Market Cap: Fell from $2.97 trillion to $2.87 trillion in just 6.5 hours.
• Bitcoin (BTC): Dropped by 3.4% in the last 24 hours.
• Altcoins: Ether (ETH) saw a 5.3% decline.
• Leveraged Positions: Over $360 million in leveraged crypto positions were liquidated, with $324 million being long positions.

Underlying Concerns

• Government Shutdown: Prediction markets like Kalshi and Polymarket estimate an 80% chance of a shutdown by January 31.
• Political Tensions: President Donald Trump's threats to raise tariffs on Canada and US warships heading to the Middle East due to Iran tensions have heightened uncertainty.
• Historical Context: During the last government shutdown, Bitcoin dropped from its all-time high of $126,080 to below $100,000, partly due to the shutdown and Trump's tariff threats with China.

Investor Sentiment

• Safe-Haven Preference: Gold has outperformed Bitcoin, indicating a preference for traditional safe-haven assets during uncertain times.
• Fear & Greed Index: The Crypto Fear & Greed Index fell to 20 out of 100, indicating "extreme fear" for six consecutive days.