Finance

Bitcoin’s Dip: How the US Government Shutdown Drained Liquidity and Shook Crypto Markets

Bitcoin dropped 19% due to the U.S. shutdown, creating a liquidity crisis; analysts predict a rally.

November 4, 2025, 4:51 PM

Three physical gold Bitcoin coins scattered on top of various US dollar banknotes (fifties and hundreds).

Gold cryptocurrency coins resting on US Dollar banknotes, symbolizing the digital and physical economies. By Rabanser / Shutterstock.com.

Executive Summary

Bitcoin’s value has dropped by approximately 19% from its all-time high, primarily attributed to a U.S. government shutdown that drained an estimated $700 billion in liquidity from financial markets.

The increase in the Treasury General Account (TGA) during the shutdown caused a significant liquidity crisis, evidenced by record high usage of the Standard Repo Facility (SRF).

Analysts anticipate a strong relief rally once the U.S. government shutdown concludes, suggesting that Bitcoin’s traditional four-year cycle remains intact despite the current market pressures.

The Story So Far

Bitcoin’s recent price drop is primarily due to a U.S. government shutdown that caused the Treasury General Account to swell, draining an estimated $700 billion in liquidity from financial markets and impacting risk assets. This macro-liquidity crisis is seen as a “perfect storm” combined with Bitcoin’s ongoing four-year cycle dynamics, which typically involve corrections after halving events, rather than signaling the end of its established market cycle.

Why This Matters

The recent U.S. government shutdown has significantly impacted financial markets by draining an estimated $700 billion in liquidity, primarily due to the swelling Treasury General Account, which has directly contributed to Bitcoin’s 19% price drop from its October high. However, analysts anticipate a substantial relief rally upon the shutdown’s conclusion as liquidity is reinjected, suggesting that despite this “perfect storm” of macro-liquidity crisis, Bitcoin’s traditional four-year cycle remains on track and is not yet finished.

Who Thinks What?

Analysts widely attribute Bitcoin’s recent 19% value drop to the U.S. government shutdown, which caused a significant liquidity drain in financial markets.

BitMEX analysts anticipate a strong relief rally for Bitcoin once the U.S. government shutdown concludes, asserting that Bitcoin’s traditional four-year cycle is not yet finished.

Bitcoin has seen its value drop by approximately 19% from its all-time high in early October, with analysts largely attributing this decline to a U.S. government shutdown. This shutdown led to the Treasury General Account (TGA) swelling to $1 trillion, effectively draining an estimated $700 billion in liquidity from financial markets, impacting risk assets including cryptocurrencies.

Liquidity Crisis and Market Impact

The increase in the TGA during the government shutdown has created a significant liquidity crisis. As cash is moved into the TGA, it is removed from the private financial system, making it unavailable for essential functions like bank lending or investment in money market funds.

This liquidity crunch is further evidenced by record high usage of the Standard Repo Facility (SRF), a tool the Federal Reserve employs to manage short-term funding and maintain stability in money markets. Elevated SRF usage typically signals that banks and other financial institutions are experiencing a shortage of cash.

Analyst Outlook and Bitcoin’s Cycle

BitMEX analysts anticipate a strong relief rally once the U.S. government shutdown concludes. They expect hundreds of billions to be reinjected into markets, which aligns with Bitcoin’s historical end-of-year seasonal strength.

Despite the current market turmoil, these analysts suggest that Bitcoin’s traditional four-year cycle is not yet finished. This perspective contrasts with previous sentiments from some analysts who believed the cycle was nearing its end, especially after Bitcoin set new all-time highs following the approval of U.S. spot Bitcoin ETFs and ahead of its fourth halving—an unprecedented occurrence in its history.

Historical Context and Current Correction

Historically, Bitcoin typically reaches a new all-time high after its halving event, followed by a substantial correction of 70-80% in the subsequent year. BitMEX analysts characterize the current crypto market correction as a “perfect storm,” driven by a combination of Bitcoin’s 4-year cycle dynamics and a broader macro-liquidity crisis.

They also noted earlier signs of the bull run potentially concluding, citing increased profit-taking among long-term, early Bitcoin holders in recent months.

Key Takeaways

The recent dip in Bitcoin’s price is primarily linked to a U.S. government shutdown that has siphoned significant liquidity from financial markets. While this has caused a short-term crisis, analysts are optimistic about a substantial relief rally post-shutdown, suggesting that Bitcoin’s established market cycle remains intact despite the current pressures.