The US government shutdown has many consequences — and this time, bitcoin’s price is one of them. Now stretching past 36 days and marking the longest shutdown in US history, the standoff has quietly drained liquidity from the financial markets.
The reaction was swift. In a market already dominated by fear, BTC dropped 10.5% between Monday and Tuesday to $99,000, before recovering to nearly $103,000. Whether this proves to be the start of a deeper correction or simply another mid-cycle shakeout will depend on three things: how quickly liquidity returns once Washington reopens, and whether investor attention and technical strength can follow.
How the shutdown drains liquidity
Bitcoin has long mirrored global liquidity cycles, typically lagging the global M2 money supply by two to three months. With M2 still expanding — partly driven by China’s record 8.4% y-o-y M2 expansion in September 2025 — the broader macro backdrop remains supportive. Yet on shorter timeframes, local liquidity shocks in the US can override global trends.
The shutdown has pushed the Treasury General Account (TGA) above $1 trillion, which has drained cash reserves from the Federal Reserve and tightened conditions in overnight funding markets. Short-term borrowing rates, such as SOFR (Secured Overnight Financing Rate) and repo, remain high, reflecting ongoing market volatility. With reserves now below $2.9 trillion, funding stress is approaching levels last seen in late 2018, when overnight rates briefly spiked out of control.
This dynamic matters because when money moves into the TGA, it leaves the banking system. The longer the government remains shut, the less cash circulates — exactly the opposite of what risk assets like bitcoin thrive on.
Some near-term relief may come as month-end pressures fade, but reserve levels are already so low that volatility is likely to persist. The latest Treasury announcement, issued on November 3rd, showed that the Treasury expected to end the year with approximately $850bn in its account. When the government finally reopens, the TGA should decline again, injecting at least $150bn of liquidity back into the system.
Bitcoin momentum needs to return
Simply restoring liquidity to normal levels may not be enough to ignite a new bitcoin rally. The asset also needs to regain momentum and investor attention.
According to the latest Wintermute report, even as global liquidity expands and central banks pivot toward rate cuts, most new capital is flowing into equities and AI, not crypto. Analysts highlight two key indicators to watch: the behavior of ETF investors and Digital Asset Treasuries (DATs) — companies that hold significant bitcoin reserves on their balance sheets.
So far, the picture isn’t encouraging for funds. Bitcoin ETFs have experienced steady outflows, with between $200m and $500m exiting daily since last Wednesday, according to data from Coinglass.
On the DAT front, however, there may be a glimmer of optimism. Strategy Inc. ($MSTR), founded by Michael Saylor, announced on November 3 a new preferred stock offering called STRE — a euro-denominated, 10 % coupon instrument. The company plans to issue 3.5 million shares at €100 each, potentially injecting fresh liquidity into the bitcoin ecosystem while opening its “digital credit factory” to the euro markets.
BTC technical signals promise resilience
A 21 % pullback from October 6’s all-time high of $126,400 is hardly alarming given bitcoin’s typical volatility. What concerns traders more are rare technical signals now flashing.
One is the 50-week moving average, a key long-term support line. Analyst Kevin Svensen notes that bitcoin has tested this level twice in the current cycle without breaking its trend. “This is the lowest BTC can go without doing critical damage,” he wrote, adding that a weekly close above the 50-week SMA (around $103 K) would confirm the uptrend’s survival.
At the time of writing, BTC is resisting above that threshold, offering some relief to traders who hope that a strong weekly close could mark the start of another leg higher.
Others view the recent correction as a mid-cycle reset, rather than the start of a bear market. Trader Merlijn The Trader, who tracks 30 top-cycle indicators, including the Pi Cycle Top, Puell Multiple, and MVRV Z-score, notes that none have triggered yet. He argues that the market has not experienced its usual “euphoria phase” that typically precedes a cycle peak. In his words, “This is mid-cycle energy, not exit-liquidity season.”
