#PartialGovernmentShutdownEnds

The partial U.S. federal government shutdown that began after funding lapsed at midnight ET on January 31, 2026 officially concluded on February 3, 2026, after President Donald Trump signed a large-scale funding bill into law, ending a brief but market-sensitive disruption that, while short in duration, carried outsized implications for risk sentiment, liquidity behavior, and crypto market volatility. The shutdown lasted roughly three to four days, affecting close to half of federal agencies after a prior continuing resolution expired over the weekend, making it one of the shortest shutdowns in recent U.S. history, yet it occurred at a fragile macro moment where markets were already dealing with tightening financial conditions, elevated leverage, and heightened political uncertainty. The Senate had passed a revised funding package on January 30 by a wide 71–29 margin, but the House delayed reconvening until February 2 due to scheduling, ultimately approving the bill on February 3 by a narrow 217–214 vote that reflected deep partisan fractures, with notable opposition from within both parties. President Trump signed the bill later that afternoon, calling it a victory for stability, triggering the immediate reopening of agencies, with most federal employees returning to work by February 4 and government operations largely normalized by early February 5. The funding package totaled approximately $1.2 trillion and provided full-year appropriations through September 30, 2026 for major departments including Defense, Labor-HHS-Education, Transportation-HUD, State and Foreign Operations, and Financial Services and General Government, including Treasury, while leaving the Department of Homeland Security funded only through February 13 under a short-term continuing resolution, effectively creating a new funding cliff centered on immigration and border enforcement negotiations. Importantly, the legislation mandated retroactive back pay for furloughed federal workers, ensuring no permanent income loss and significantly reducing potential consumer-side economic drag. In terms of operational impact, the shutdown temporarily affected non-essential functions across Defense administration, Treasury, State, Transportation-HUD, Judiciary operations, and various executive offices, while essential services such as USPS, Social Security payments, air traffic control, national security, Veterans Affairs, NASA, and Congress itself continued largely uninterrupted, preventing the kind of widespread service disruptions seen in longer shutdown episodes. From a macroeconomic perspective, the shutdown was estimated to impact well under one percent of overall U.S. economic activity, with no immediate measurable GDP drag, and traditional financial markets treated the episode as contained political noise rather than a systemic threat, as equities saw only minor, short-lived dips, bond yields remained stable, and Treasury market liquidity showed no signs of stress. Crypto markets, however, reacted far more aggressively, reflecting their heightened sensitivity to uncertainty, leverage dynamics, and liquidity shocks. During the January 31 to February 3 window, Bitcoin fell sharply from pre-shutdown levels near $83,000 to intraday lows around $72,800, marking a roughly 12–14 percent drawdown in a matter of days and printing its lowest levels since late 2024, while Ethereum underperformed further, sliding toward the $2,150–$2,200 range and recording steeper percentage losses, with many altcoins such as Solana and XRP experiencing accelerated declines as risk-off behavior spread across the market. Market sentiment deteriorated rapidly, with fear indices shifting into extreme fear territory as concerns mounted over delayed economic data releases, stalled regulatory processes at the SEC and CFTC, and the possibility of prolonged fiscal dysfunction. Liquidation dynamics played a central role in amplifying the sell-off, with over $1.6 billion in crypto positions wiped out in a single session at the peak of panic, the vast majority of which were long positions, highlighting how leverage-heavy positioning turned a macro headline into a cascading forced-sell event. Trading volumes surged sharply across both futures and spot markets, with large red candles confirming panic exits and margin calls, while spot liquidity thinned temporarily, widening bid-ask spreads and increasing short-term volatility. ETF flows added another layer of pressure, as Bitcoin spot ETFs recorded heavy single-day outflows led by major issuers, while smaller but notable inflows into select altcoin ETFs suggested early-stage capital rotation rather than a full exit from digital assets. Once the funding bill was signed on February 3 and agencies reopened, uncertainty eased quickly, triggering a relief-driven rebound across crypto markets, with Bitcoin bouncing from its lows back toward the mid-$75,000 area, recovering roughly 3–5 percent from the bottom within hours, Ethereum stabilizing and reclaiming part of its losses, and broader market capitalization finding a temporary floor. Liquidation flows flipped toward short covering during the rebound, volumes remained elevated but shifted in tone, and liquidity conditions normalized rapidly as spreads tightened and institutional participation began to re-emerge. Looking forward, the rapid resolution of the shutdown limited long-term damage, but risks remain, particularly around the February 13 DHS funding deadline, which could reignite political uncertainty, while crypto markets remain tightly linked to broader macro drivers such as Federal Reserve policy expectations, risk appetite, and leverage conditions. The key takeaway is that while the shutdown itself was short and economically contained, it served as a reminder that even brief political disruptions can act as powerful volatility catalysts in crypto markets, where structural leverage and sentiment can transform modest macro events into sharp price dislocations, making risk management and liquidity awareness critical in such environments.