Synopsis: Bitcoin and other cryptocurrencies stopped falling Tuesday after U.S. lawmakers passed a funding bill, ending a brief government shutdown that rattled markets and triggered heavy selling.
Bitcoin and other digital currencies halted their sharp decline on Tuesday after U.S. lawmakers narrowly passed a crucial funding package. The move ended a brief but nerve-wracking government shutdown that had rattled financial markets. On the other hand, traders watched anxiously as the House vote came down to a razor-thin margin of 217-214.
The partial shutdown began on January 31, 2026, when Congress failed to reach agreement on federal spending. This created widespread uncertainty across markets as key agencies stopped operations. Federal workers faced furloughs while critical economic data releases were delayed. The resulting “data vacuum” left investors scrambling to assess economic conditions without reliable information.
Market Panic
Cryptocurrency prices experienced an unrelenting plunge throughout Tuesday morning as shutdown fears intensified. Bitcoin crashed to $72,800, marking its weakest level since before Trump’s November 2024 election victory. This represented a dramatic reversal from the optimism that had followed the election results. Other major cryptocurrencies followed suit with steep losses across the board.
Ether dropped to $2,181, registering a 7% decline over 24 hours and 26% loss for the week. Popular tokens like XRP and Solana saw similar double-digit percentage drops. The total crypto market shed billions in value as panicked traders rushed for exits. Traditional stock markets also tumbled, with the Nasdaq falling 2% and S&P 500 declining 1.3%.
Congress Breaks Deadlock
The House of Representatives passed a $1.2 trillion funding package on Tuesday afternoon with minimal votes to spare. The bill funds most federal agencies through September 30, 2026, providing much-needed stability. However, lawmakers only approved a two-week extension for the Department of Homeland Security. This means further negotiations will occur over the next week and a half.
President Donald Trump quickly signed the legislation, officially ending the shutdown within hours of passage. Federal agencies immediately began reopening as furloughed workers prepared to return. Back pay provisions ensure affected employees receive compensation for shutdown days. The swift resolution prevented what could have become a prolonged budget crisis.
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Crypto Rebounds From Worst Levels
The funding package news provided immediate relief to cryptocurrency markets in freefall. Bitcoin bounced back from its $72,800 low to trade around $76,600 by late afternoon. While still down 2.3% over 24 hours, the recovery halted the panic selling. Traders viewed the government reopening as removing a major source of uncertainty.
Despite the rebound, crypto remains under pressure from multiple factors beyond the shutdown concerns. Investment products saw massive outflows with spot Bitcoin ETFs recording $509.7 million in redemptions recently. Major players like BlackRock led the exodus as institutional investors reduced risk exposure. Over $1.68 billion in liquidations occurred as leveraged positions got wiped out during volatility.
Uncertainty Lingers Despite Resolution
The crypto market’s extreme sensitivity to macroeconomic events remains evident from this episode. Digital assets continue showing strong correlation with traditional risk assets rather than acting as safe havens. Gold attracted inflows during the crisis while cryptocurrencies experienced heavy selling pressure. This challenges the “digital gold” narrative that many crypto advocates promote.
Looking ahead, the February 13 deadline for Homeland Security funding could introduce fresh volatility. Additional budget negotiations may revive uncertainty if lawmakers struggle to reach consensus again. Furthermore, the shutdown delayed regulatory progress at agencies like the SEC and CFTC. This freeze on crypto policy developments adds another layer of unpredictability for market participants.
Bitcoin currently trades well below its recent highs despite recovering from Tuesday’s worst levels. Ether and other major tokens remain significantly down from their peak valuations. Market sentiment stays cautious as traders assess whether this represents a temporary bounce or sustainable recovery. The coming days will prove critical in determining crypto’s near-term direction.
Written By Fazal Ul Vahab C H
