Will crypto market recover as U.S. government shutdown ends?

The crypto market showed early signs of stability on Feb. 4 after U.S. President Donald Trump signed a funding bill that brought a short-lived government shutdown to an end.

Summary

• Crypto rebounded after political uncertainty eased with the shutdown deal.
• The recent selloff was driven by liquidations and risk aversion.
• Attention is shifting to February macro data and the next funding deadline.

The move reduced immediate political uncertainty, which had unsettledfinancial markets in recent days. Bitcoin recovered to the $76,000 area during Asian trading hours, after swinging sharply over the weekend

At its weakest point on Feb. 3, Bitcoin (BTC) fell to roughly $73,100, its weakest since before Trump’s 2024 election win. The larger cryptocurrency market appeared to stabilize after significant selling earlier in the week, with the total market capitalization stabilizing close to $2.7 trillion

Thin weekend liquidity, forced liquidations, and investor caution had all contributed to the decline. Ethereum (ETH) and other major altcoins had seen a significant decline alongside Bitcoin, with ETH falling toward the $2,200 mark before regaining some ground

Trading activity rose as prices recovered, suggesting that traders were taking short-term positions in response to the political developments. Even so, prices remain well below recent highs, and confidence across the market is still fragile.

Shutdown uncertainty pressured crypto markets

The partial government shutdown started in Jan. 31 after U.S. lawmakers could not reach a funding agreement, primarily 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 for investors. On Feb. 3, Trump signed a spending package that extended funding for most government operations through September 2026.

Funding for DHS, however, was only extended until Feb. 13. The bill passed the House by a narrow margin after internal divisions within the Republican Party delayed progress.

During the shutdown period, exposure to risk assets was reduced across markets. As uncertainty about 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 was approved. Prices recovered from their recent lows thanks to selective dip buying.

Relief rally faces key tests in February

Analysts largely view the rebound as a relief-driven move rather than a clear trend reversal. Past sessions have been marked by sharp price swings, with fast sell-offs followed by equally quick recoveries in low-liquidity conditions.

Although the market has calmed down, technical indicators show that the recent damage has not yet been completely undone Attention now turns to Feb. 13, when DHS funding is set to expire. Negotiations breaking down again could rekindle shutdown concerns and put risk assets under further strain

Investors are also keeping a close eye on upcoming U.S. economic data, with inflation figures due later this month and employment figures expected around Feb. 6. These reports may have an impact on market liquidity conditions as well as expectations regarding Federal Reserve policy.