Despite a worrying drop on Friday, Bitcoin survived the $100,000 crash test. Attention now turns to Washington. The longest U.S. government shutdown in history has drained liquidity from financial markets – and by extension, crypto.
Analysts say that when the fiscal impasse ends, the same mechanism that took the cash out will bring it back in, paving the way for a recovery.
The government shutdown, which began on October 1, 2025entered its sixth week after Congress failed to pass new funding.
The impasse stems from conflicts over health care subsidies and spending levels. Both parties refuse to pass a “clean” budget bill.
The economic results have been measurable. The Congressional Budget Office (CBO) estimates losses between $7 billion and $14 billion.
In fact, U.S. fourth-quarter GDP growth will likely be reduced by as much as two percentage points.
Consumer confidence is near an all-time low, air travel is disrupted due to air traffic shortages, and government programs are facing funding challenges.
The prolonged liquidity freeze has become a significant drag on the economy.
In financial terms, the shutdown froze hundreds of billions of dollars inside the country. General Treasury Account (TGA) — the government’s cash reserve. Every dollar parked there is a dollar not circulating in the financial system.
Since the US debt ceiling was raised in July, the The TGA balance exceeded $850 billiondraining liquidity of approximately 8%. Bitcoin mirrored the move, sliding roughly 5% in the same period.
This correlation, long observed by on-chain analysts, highlights crypto’s deep sensitivity to dollar liquidity.
Arthur Hayes calls this dynamic “stealth QE in reverse.” As the Treasury accumulates cash, liquidity tightens, risk assets fall, and Bitcoin corrects.
But once the government reopens and resumes spending, that liquidity will flow back through banks, money markets, and stablecoin systems, reversing the drain.
The short answer is yes, the crypto market is very likely to recover or recover once the paralysis of the American government is over.
However, the timing and extent will depend on how liquidity is injected back into the system.
Crypto – and Bitcoin in particular – trade as a liquidity-sensitive risk asset. When dollar liquidity tightens, cryptocurrency prices fall; when liquidity increases, it increases.
March 2020: Global liquidity injections triggered the start of the COVID bull run.
March 2023: The Fed’s balance sheet expansion during the US banking crisis triggered a Bitcoin rally from $20,000 to $30,000.
2025: The correlation between Bitcoin and dollar liquidity (as measured by the USDLiq index) remains near 0.85, one of the strongest among all asset classes.
Bitcoin has closed above $100,000 for six straight months and the RSI remains around 46, well below euphoric levels. Analysts describe the current phase as “pain window», motivated by a temporary budgetary tightening.
Bitcoin and RSI price chart. Source: TradingView
The broader macroeconomic picture supports their argument.
Rate cut expectations for early 2026 increase as fiscal paralysis weakens near-term growth.
Global Liquidity China and Japan are increasing, offsetting US tightening.
Speculative leverage in crypto has been eliminated, leaving a healthier market base.
Together, these factors create the conditions for Bitcoin to recover towards the $110,000 to $115,000 during the next quarter, provided that no new shocks appear.
The crypto correction has less to do with waning enthusiasm and more to do with freezing liquidity.
Once the U.S. government reopens, Treasury spending and Fed support mechanisms – such as the Permanent Pension Facility – will reintroduce cash into the system.
The general expectation is that crypto fell because dollars stopped moving. It will increase when they start flowing again.
In practical terms, the end of the shutdown could mark the start of a liquidity-driven rebound in crypto markets.
