The prolonged U.S. government shutdown, now in its second month, is generating a “liquidity freeze” that is directly reflected in Bitcoin’s on-chain metrics. The Congressional Budget Office (CBO) has warned that this fiscal paralysis not only threatens to cut U.S. GDP by up to 2% in the fourth quarter but is also draining capital from the crypto market.
The impact is visible in three key metrics: BTC reserves on exchanges have risen for the first time in six weeks, signaling a defensive posture or preparation for selling. At the same time, miner reserves have fallen to their lowest levels since mid-2025, suggesting forced sales to cover operational costs as subsidies are suspended. Finally, stablecoin withdrawals from exchanges have reached all-time highs, indicating a clear rotation from risk assets to safe-haven assets.
This capital contraction has plunged the Fear & Greed Index to “Extreme Fear” levels, similar to those seen during the 2023 banking crisis. Although the CBO expects an economic rebound once the shutdown ends, on-chain data suggests investor confidence will take longer to recover. The market is watching to see if this is a temporary dip or a deeper liquidity stress test for Bitcoin, exacerbated by fiscal dysfunction.
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