The crypto market showed the first signs of stability on February 4 after US President Donald Trump signed a funding bill that ended a short-lived government shutdown.
Summary
- Crypto rebounded after political uncertainty subsided due to the shutdown deal.
- The recent sell-off was driven by liquidations and risk aversion.
- Attention shifts to February’s macro data and the next funding deadline.
This measure reduced the immediate political uncertainty that had roiled financial markets in recent days. Bitcoin recovered to the $76,000 area during Asian trading hours after a sharp swing over the weekend.
At its weakest point on February 3, Bitcoin (BTC) fell to around $73,100, its weakest point since Trump’s 2024 election victory. The larger cryptocurrency market appeared to stabilize after significant selling earlier this week, with the total market capitalization stabilizing at almost $2.7 trillion.
Tight weekend liquidity, forced liquidations and investor caution had all contributed to the decline. Ethereum (ETH) and other major altcoins had seen significant declines alongside Bitcoin, with ETH falling towards $2,200 before regaining some ground.
Trading activity increased as prices recovered, indicating traders were taking short-term positions in response to political developments. Yet prices remain well below recent highs and confidence in the market is still fragile.
The uncertainty surrounding the shutdown put pressure on the crypto markets
The partial government shutdown began on January 31 after US lawmakers failed to reach a funding deal, mainly due to disputes over Department of Homeland Security spending and immigration policy.
Several federal agencies were affected, and delays in key economic data added further uncertainty to investors. On February 3, Trump signed a spending package that extended funding for most government operations through September 2026.
However, funding for DHS was only extended until February 13. The bill passed the House of Representatives by a narrow margin after internal divisions within the Republican Party slowed progress.
During the shutdown period, exposure to risky assets was reduced across all markets. As uncertainty over government operations, regulations and macro data increased, cryptocurrencies, which often move in tandem with growth-oriented stocks, came under pressure.
Some of that selling pressure has subsided after the bill passed. Prices recovered from their recent lows thanks to selective dip buying.
The relief meeting faces important tests in February
Analysts largely see the recovery as a relief and not a clear trend reversal. Recent sessions have been characterized by sharp price swings, with rapid sell-offs followed by an equally rapid recovery amid low liquidity.
Although the market has calmed, technical indicators show that the recent damage has not yet been completely undone. Attention now turns to February 13, when DHS funding expires. If negotiations fail again, concerns about a shutdown could be reignited and risk assets could come under further pressure.
Investors are also keeping a close eye on upcoming US economic data, with inflation figures expected later this month and employment figures expected around February 6. These reports can impact market liquidity conditions as well as expectations regarding Federal Reserve policy.
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