Why Bitcoin (BTC) Price Is Down: Government Shutdown Liquidity Drain Evident

Bitcoin Falters Below $100K as Macro Pressures Mount

Bitcoin (BTC) and the broader cryptocurrency market are facing significant headwinds, with prices consistently sliding during U.S. trading hours. After a brief overnight rally to nearly $104,000, Bitcoin reversed its course, tumbling below the critical $100,000 psychological support level. This price action is part of a wider trend that has seen digital assets struggle against a complex macroeconomic backdrop.

The downturn isn’t isolated to crypto. Risk assets across the board are feeling the pressure, with the Nasdaq falling 2% and the S&P 500 dropping 1.3%. Investors are recalibrating their expectations as the likelihood of a December interest rate cut from the Federal Reserve diminishes. But for Bitcoin, there’s another, less obvious factor at play: a significant, albeit temporary, drain on market liquidity tied directly to the recent government shutdown.

The Immediate Culprit: Fading Hopes for a Fed Pivot

For months, market participants have been banking on the Federal Reserve to ease its monetary policy. However, with economic data remaining resilient, the odds of a rate cut next month have dwindled to a 50/50 chance. This shift in sentiment has put a damper on assets like Bitcoin, which have historically thrived in low-interest-rate, high-liquidity environments.

“Crypto is closely linked to macro-economics now more than anytime in the past,” explains Paul Howard, senior director at trading firm Wincent. He believes this connection will keep a lid on prices for the immediate future. “My sense is with just six weeks left, we’ve seen the all-time highs for 2025,” Howard notes. “From here, we likely get a steady ascension over the course of the coming year — volatility acknowledged.”

The Deeper Reason: The

While Fed policy is a major factor, the more unique pressure point is a squeeze on market liquidity caused by the U.S. government shutdown. It’s a classic paradox: while many investors criticize government deficits, the spending associated with those deficits injects vast amounts of cash into the financial system, propping up asset prices.

The recent shutdown flipped this dynamic on its head. According to market analyst Mel Mattison, the federal government ran an astonishing $198 billion fiscal surplus in September. With much of Washington D.C. closed for October, the upcoming data is expected to show an even larger surplus. This isn’t a sign of fiscal responsibility; it’s a sign of money being pulled *out* of the economy.

“We have had one of the driest periods for fiscal liquidity in months if not years,” Mattison stated. This “liquidity drain” means there is less cash available in the market to buy assets like stocks and crypto, leading to downward price pressure.

Ripple Effects: Crypto Equities Hit Hard

The impact of this downturn is clearly visible in the performance of crypto-linked stocks, which are suffering heavy losses. The sector has been hit with a double whammy of falling Bitcoin prices and a general risk-off sentiment in equity markets.

• Crypto Miners: Companies with significant AI and data center exposure, such as Bitdeer (BTDR) and Bitfarms (BITF), have plummeted by 19% and 13%, respectively. Cipher Mining (CIFR) and IREN also saw losses exceeding 10%.
• Exchanges and Platforms: Major players like Galaxy (GLXY), Bullish (BLSH), Gemini (GEMI), and Robinhood (HOOD) all experienced steep declines in the 7-8% range.

What’s Next? A Flood of Liquidity on the Horizon

While the current environment appears bleak, the liquidity drain is expected to be temporary. Mattison believes the situation is about to dramatically reverse course.

“The flood gates are about to open,” he predicts. “The [Trump administration] is going to unleash a tsunami of fiscal largess in coming quarters. Mid-terms must be defended.”

This suggests that once government spending resumes, a massive wave of liquidity will be injected back into the markets. While the next few weeks may remain choppy, this eventual return of government funds could provide the fuel needed for Bitcoin and other risk assets to resume their upward trajectory. For now, traders are closely watching for signs that the fiscal taps are being turned back on.