Bitcoin Resilient Despite Crypto Liquidity Squeeze
Bitcoin has passed the $100,000 crash test despite a concerning decline on Friday. The focus now shifts to Washington. Financial markets and, consequently, cryptocurrency have lost liquidity due to the longest government shutdown in US history. The same dynamic that drew liquidity out will bring it back in once the fiscal impasse is resolved, according to analysts, paving the way for a comeback.
After Congress failed to approve additional financing, the government shutdown, which started on October 1, 2025, entered its sixth week. Conflicts over healthcare subsidies and spending levels are at the root of the impasse. A clean budget bill is being rejected by both parties.
Bitcoin Feels Impact of Stealth QE as Treasury Hoards Cash
The financial loss has been quantifiable. Losses are estimated by the Congressional Budget Office (CBO) to be between $7 billion and $14 billion. In actuality, the US GDP growth in the fourth quarter was probably reduced by as much as two percentage points. State programs are under financial strain, air travel is delayed by air traffic shortages, and consumer sentiment is close to all-time lows. The economy is now severely hampered by the extended cash restriction.
Financially speaking, the closure has caused the government’s cash reserve, the Treasury General Account (TGA), to freeze hundreds of billions of dollars. The TGA balance has surpassed $850 billion since the US debt ceiling was lifted in July, depleting liquidity by around 8%. Bitcoin declined by almost 5% during the same time frame, mirroring the movement. On-chain analysts have long seen this link, which emphasizes how sensitive cryptocurrency is to dollar liquidity.
This dynamic is referred to by Arthur Hayes as a stealth QE in reverse. Bitcoin corrects, risk assets decline, and liquidity tightens as the Treasury hoards cash. That liquidity will reappear through banks, money markets, and stablecoin systems once the government reopens and starts spending again. The prior drain will essentially be reversed by this inflow.
Crypto Market Eyes Post-Shutdown Bounce as Liquidity Returns
After the US government shutdown is finished, the cryptocurrency market is probably going to rebound or surge. However, how liquidity is reintroduced into the system will determine the timing and amount. Cryptocurrency, and Bitcoin specifically, is traded as a risk asset that is sensitive to liquidity. Crypto prices decrease when dollar liquidity tightens and increase when liquidity expands. Over several cycles, this pattern has been repeated.
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