Bitcoin Rebounds as U.S. Avoids Shutdown, Highlighting Political Risk

Bitcoin (BTC) slid to around $72,800 on February 4, 2026, as U.S. lawmakers engaged in a tense debate over a roughly $1.2 trillion stopgap funding package needed to avert a partial government shutdown. According to on-chain analytics firm Santiment, the sell-off unfolded during U.S. trading hours as headlines pointed to a tight vote in the House of Representatives. The uncertainty triggered about $30 million in decentralized finance (DeFi) liquidations and mirrored a synchronized drop in traditional assets, including the S&P 500 and even gold—an asset typically viewed as a safe haven.

This broad-based correlation indicated traders were reducing exposure to volatile assets across the board due to the political standoff, not reacting to crypto-specific developments. The concern centered on the potential for a shutdown, which would have delayed critical economic data and added stress to an already cautious market. The vote saw divisions within the Republican Party, with one representative voting against the bill due to foreign aid provisions. However, the bill ultimately passed, averting a shutdown and causing markets to respond with immediate relief.

Following the House’s passage of the bill, Bitcoin bounced from its lows, climbing over 5% within hours, with the S&P 500 also recovering. Santiment’s analysis concluded that the speedy recovery demonstrated that fears of political dysfunction, rather than a fundamental reevaluation of Bitcoin’s value, were the primary driver behind the earlier sell-off. This quick turnaround provided a clear case study in how U.S. political risk remains a potent short-term catalyst for crypto price action.

While the resolution of the funding bill provided immediate relief, Bitcoin continues to face significant broader pressures. Per data from CoinGecko, the asset is down nearly 14% over the last seven days and 17% for the month. A recently published analysis from Galaxy Digital pointed to deteriorating on-chain metrics, with research head Alex Thorn noting that 46% of Bitcoin’s circulating supply is now ‘underwater,’ meaning it was last moved at higher prices. This condition can increase potential selling pressure as holders may be reluctant to realize losses.

Thorn also highlighted a lack of significant accumulation by large holders, suggesting a pause in institutional or whale buying momentum. Furthermore, geopolitical developments added to the negative sentiment. On February 3, reports that Iran was seeking to shift the format of its nuclear talks with the U.S. contributed to another leg down in Bitcoin’s price, pushing it below $75,000 and liquidating at least $20 million worth of derivative positions.

Some analysts have begun revising their downside targets in light of these pressures. For instance, analyst Doctor Profit has suggested the cycle bottom could hit a range between $44,000 and $54,000. The key question for the market is whether the resolution of the immediate U.S. political risk will be sufficient to reverse these negative technical and on-chain trends, or if Bitcoin remains vulnerable to a deeper test of support levels in the coming weeks.

The February 4 price action served as a stark reminder that cryptocurrency markets, despite their technological novelty, are not insulated from traditional macroeconomic and political forces. The synchronized movement of Bitcoin with the S&P 500 and gold during the shutdown scare illustrates how crypto assets are increasingly treated as risk assets within a broader portfolio context during times of uncertainty.

This episode underscores that traders and algorithms are reacting to headlines from the U.S. Congress with the same urgency as they might to Federal Reserve announcements or major economic indicators. The market’s swift rebound upon the bill’s passage confirms that the sell-off was driven by transient fear rather than a lasting shift in sentiment. However, with underlying on-chain metrics showing weakness and geopolitical tensions like those involving Iran adding to the mix, Bitcoin’s path forward will depend on navigating both political headlines and its own internal market structure.