The truth is out there. For a long time, investors struggled to understand why Bitcoin had decoupled from US stock indexes. Those who tried to explain BTC/USD dynamics through its "digital gold" status were also proven wrong. But what if the sell-off in digital assets was caused by the US government shutdown? Judging by the heavy losses across financial markets, that theory seems quite plausible.

How different assets reacted to the shutdown

One of the key drivers behind the BTC/USD rally from September 2024 to January 2025 was Donald Trump's promise to turn America into the "crypto capital of the world." The administration took a friendlier stance toward digital assets, even passing stablecoin legislation. Investors expected this positive trend to continue — but the longest government shutdown in US history derailed those hopes.

At Bitcoin's record high in early October, the total crypto market capitalization reached $4.4 trillion, but has since fallen sharply. Year-to-date growth is now barely positive.

Another catalyst for the sell-off was the 20% correction in BTC/USD from its all-time high — a drop that, by stock-market standards, marks the onset of a bear market. This triggered major selling by so-called crypto whales — holders with between 1,000 and 10,000 BTC — who offloaded roughly 400,000 coins, according to 10x Research.

The firm, which previously attributed market consolidation to redistribution between whales and institutional investors, now says the market is seeing active liquidation instead.

Capital flows in Bitcoin-focused ETFs

10x Research notes that during past bear markets, large players sold off as many as 1 million BTC. If history repeats itself, BTC/USD could fall toward $85,000.

That process could be accelerated by capital outflows from Bitcoin ETFs. According to K33 Research, the break-even level for these funds sits around $89,613. When Bitcoin briefly dropped below $100,000, derivatives trading volume surged — with many contracts targeting $80,000 strike prices.

However, rumors that the US government shutdown may soon end have come as welcome relief for Bitcoin. The Senate voted 60–40 to pass a bill to reopen the government, which now heads to the House of Representatives and, if approved, to the President's desk.

It seems that the crypto winter for Bitcoin may have ended before it even began. If the government shutdown truly was the main reason behind BTC/USD's decline, then the resumption of federal operations could reignite bullish momentum.

That said, a renewed correlation with US stock indices — particularly as the S&P 500 consolidates — might temper Bitcoin's upside in the near term.

Technical outlook

On the daily BTC/USD chart, a Wolfe Wave pattern appears to be forming. A break and close above the pivot level of 108,300 would activate the pattern, increasing the likelihood of a rally toward 118,500 and signaling potential buying opportunities. Conversely, a rejection from this level would provide a reason to sell.