Bitcoin Dips Below $80K Amid Fed Uncertainty & Government Shutdown

Bitcoin’s price action over the past week has been decisively negative, with the cryptocurrency plunging 11% and breaking below the psychologically significant $80,000 level. According to data from CoinGecko, BTC fell as low as $74,591 on Sunday before a slight recovery to $78,453. This decline coincides with two major macroeconomic events unfolding in the United States: a partial government shutdown and a pivotal change in leadership at the Federal Reserve. President Donald Trump’s nomination of Kevin Warsh to replace Jerome Powell as Fed Chair in May has injected significant uncertainty into financial markets, including crypto.

Shady El Damaty, CEO of Holonym, highlighted the market’s concern, noting that Warsh is perceived as more hawkish than the incumbent Powell, particularly given his past criticism of the Fed’s quantitative easing and balance sheet expansion policies. “That’s raising concern about how aggressive he might be with rate policy if inflation ticks up again,” El Damaty told Decrypt. For cryptocurrency investors, the uncertainty is paramount. “For crypto, the real issue is uncertainty right now, nobody knows if he’d follow through on those views, especially in an election year where pressure to maintain liquidity will be intense,” he added. This political and policy vortex, combined with the government shutdown, has created a risk-off environment that has pressured Bitcoin’s price.

The shift in market sentiment is starkly visible on prediction platforms. Data from Myriad, a prediction market owned by Decrypt’s parent company Dastan, shows that the likelihood of Bitcoin falling to $69,000 has jumped to 68%. More broadly, bearish sentiment around Bitcoin’s price surged 35% in the past week alone, directly correlating with BTC’s drop below $80,000. This quantitative measure from crowd-sourced predictions indicates a strong consensus among participants that further downside is the most probable near-term path.

However, this pessimism appears to be focused on a short-to-medium-term correction rather than a catastrophic collapse. At the time of writing, users on Myriad rated the chance of crypto markets entering a prolonged ‘crypto winter’ at less than 4%. This distinction is crucial: while traders are bracing for more pain, the long-term structural bearish case has not gained significant traction in these prediction markets. The sentiment reflects a market grappling with immediate headwinds but not necessarily abandoning the longer-term thesis for digital assets.

In this fragile environment, market analysts are advising caution. Analysts at Singapore-based crypto trading firm QCP Capital noted that while the drop has been severe, there are signs Bitcoin is attempting to stabilize. They pointed out that the caution signaled in Bitcoin options markets, while notable, is still less severe than during the sell-off in November, when the price dropped from $107,000 to the $80,500 range. This historical comparison suggests the current fear gauge, while elevated, is not at peak levels.

Nevertheless, the QCP team warned that “price action, however, remains fragile. Momentum continues to point lower and upside remains constrained near recent resistance levels, leaving markets exposed to further liquidation-driven moves.” In response, they recommend a prudent, structured approach to risk management. Specifically, they suggest a ‘short seagull’ options strategy. This involves using a put spread (buying and selling puts at different strike prices) financed by selling an out-of-the-money call. In simple terms, it’s a trade that provides defined protection against a further price drop while accepting limited participation in any near-term rebound—a fitting strategy for traders who are worried about downside but do not expect a major rally.

The collective picture from price data, prediction markets, and analyst commentary is one of a crypto market under pressure from traditional financial and political forces. The nomination of a potentially hawkish Fed chair in Kevin Warsh has become a focal point for uncertainty, exacerbating the impact of the U.S. government shutdown. While the immediate technical and sentiment indicators point to further potential declines toward $69,000, the market’s refusal to price in a high probability of a crypto winter suggests an underlying resilience. For now, traders are navigating the volatility with defensive strategies, waiting for greater clarity on the macroeconomic and policy landscape.