Will the U.S. Government Shutdown Storm Strike Again, and Will the Crypto Market Replay the Plunge Script?

Last October, the U.S. government shutdown lasted for 43 days, coinciding with a global liquidity crunch, which triggered a significant downturn in the crypto market.

Many still vividly remember that period. And by the end of this month, a similar situation might occur again.

Three days ago, during an interview at Davos, Trump stated, "I think we're in trouble again, very likely heading for another government shutdown caused by the Democrats." Although lawmakers are working hard to finalize a funding agreement, with the January 30th deadline approaching and only four working days left for the U.S. government, another shutdown seems difficult to avoid.

Currently, the probability on Polymarket for "Will the U.S. government shut down again before January 31st?" has surged to 80%.

The current disagreements between the two parties primarily focus on funding for ICE and the Affordable Care Act (ACA, commonly known as Obamacare). These are long-standing contentious topics in electoral campaigns between the two parties: immigration policy and social welfare. To understand more deeply why the government might shut down, we must start with one of the largest welfare fraud cases in U.S. history, which occurred in Minnesota.

It All Starts with Minnesota

U.S. federal agents investigating a fraud case in Minnesota

The story begins at the onset of the pandemic in 2020. The U.S. has a traditional welfare policy: providing free meals to children from low-income families. Before the pandemic, this benefit was strictly managed; meals had to be consumed on-site at schools or designated community centers, with attendance taken to prevent fraud. However, when the pandemic hit and schools closed, children were at home. Consequently, Congress broadly allowed meals to be taken away, relaxing strict verification. Any registered non-profit organization could claim reimbursement from the government based on the number of meals reported, with no upper limit.

This loophole set the stage for the Minnesota welfare fraud case, which was exposed by American independent media blogger Nick Shirley.

In December 2025, Nick Shirley released a 42-minute investigative video that "went viral overnight." In the video, he exposed a group of non-profit organizations operating under the guise of "child nutrition" and "aid to vulnerable groups." These organizations applied for funds from state and federal governments, claiming to serve tens of thousands of children on paper. However, a large number of these children did not exist, and the meals were never provided. These so-called public welfare projects were merely shells used to siphon off government funds.

After its release, the video spread rapidly, garnering tens of millions of views within the first 24 hours. With various short video clips and reposts, the overall reach exceeded 100 million views. Following the incident's escalation, investigations by the Department of Homeland Security (DHS) and the Federal Bureau of Investigation (FBI) revealed that since 2018, the federal government had allocated a total of $18 billion to 14 public programs in Minnesota, with the fraud amount involving as much as $9 billion. This is one of the largest welfare fraud cases in U.S. history.

The politically explosive nature of this case lies in the fact that it occurred in Minnesota.

Minnesota has long been a Democratic stronghold, and its Democratic governor was once Harris's running mate. It is also a state heavily reliant on welfare programs, with an unusually high density of non-profit organizations. Over the past decade, the state's welfare system has developed a structure of "outsourced governance": the government does not directly provide services but delegates a large number of public functions to non-profit organizations. In theory, this is for efficiency and community autonomy; but in reality, it has created a gray area with extremely lax oversight, weak regulation, and highly entangled political relationships.

Many of the involved organizations have close ties to the local Democratic political ecosystem. Evidence suggests that a significant portion of the funds obtained by these welfare fraud organizations flowed into Democratic campaign donations.

Simultaneously, Minnesota itself is a highly immigrant-populated state, with large communities such as Somali immigrants. The Minnesota Attorney General's Office stated that among the 92 defendants charged in this case, 82 are Somali Americans. This intertwines issues of immigration enforcement, welfare distribution, and public safety, precisely hitting the core topics of long-standing opposition between the Democratic and Republican parties. It is also a focal point of policy promises repeatedly emphasized by Trump and the Republican Party in their campaigns.

Since someone handed them a knife, the Republicans naturally chose to plunge it in deeply.

America's biggest current "influencers," Trump and Musk, have frequently shared related content, sharply criticizing Minnesota's handling of the situation and linking such opaque, potentially abusive subsidy policies to the Democratic Party's long-term expansion of social welfare.

Due to the exposure of the Minnesota welfare fraud case, Trump significantly intensified immigration enforcement in Minnesota. The DHS and FBI dispatched a large number of agents to continue investigations and crackdowns on illegal immigration. ICE (Immigration and Customs Enforcement), as the primary enforcement agency under DHS, became the main force in this operation.

However, the sudden increase in enforcement intensity quickly led to serious consequences.

On January 7th, ICE agents accidentally shot and killed a 37-year-old woman, Renée Good, during a local enforcement action, drawing nationwide attention. Just 17 days later, on January 24th, another U.S. citizen, Alex Pretti, was fatally shot by federal immigration enforcement officers in the area.

Two consecutive fatal shootings plunged Minnesota into complete chaos. Large-scale protests and riots erupted locally, even requiring the National Guard to maintain order. The Democrats quickly seized this opportunity, using the fatal shootings by ICE in Minnesota as ironclad evidence of the agency's out-of-control enforcement methods.

Citizens spontaneously mourn victims shot by law enforcement officers

So, why would this affect a potential U.S. government shutdown on January 31st?

Under the U.S. constitutional system, the power of the purse rests with Congress; the executive branch cannot decide to continue spending on its own. Each fiscal year, Congress must pass 12 annual appropriations bills, corresponding to 12 policy areas: Defense, Homeland Security, Agriculture, Transportation-Housing, etc. These bills determine how much money a department can spend and on what during that fiscal year. If an appropriations bill is not passed, or if the legal authorization for a fiscal year expires and Congress fails to pass new authorization in time, that department runs out of budget and must shut down. This is the so-called government shutdown.

The normal process is that the fiscal year begins on October 1st. If an agreement isn't reached by then, Congress passes a continuing resolution (CR), providing temporary funding to keep the government running and setting a new deadline. The January 30th date we are focusing on now is the expiration date of the current CR. If the formal appropriations bills are not passed and the CR is not extended by that date, the U.S. government will shut down, either fully or partially.

Passing these appropriations bills requires approval first by the House of Representatives and then by the Senate. Currently, the House has completed its part, and the process is stalled in the Senate.

U.S. Senate rules require 60 votes to pass government funding bills. The current Senate seat distribution is: Republicans 53 seats, Democrats 45 seats, plus 2 independent senators who caucus with the Democrats, giving the Democratic bloc a total of 47 votes. Even if Republicans are "unanimous," they only have 53 votes, unable to unilaterally reach the 60 votes needed to end debate (cloture).

This means that if Democrats choose to filibuster collectively, Republicans must secure at least 7 votes from the Democratic camp to bring the appropriations bill to a final vote and thus avoid a government shutdown. This is also why Trump has been proposing for most of the past year to abolish the procedural threshold of "requiring 60 votes."

Therefore, in this context, the funding negotiations currently risking a government shutdown involve the Department of Homeland Security (DHS) budget, which includes ICE, as the most contentious and hardest-to-reach-consensus part.

Many voices on social media support ICE enforcement agencies

The Democratic logic is clear: ICE caused two deaths in Minnesota, proving the agency has serious issues with its enforcement methods. Without substantive reform of ICE and the addition of strict restrictions, why should we continue to fund it? Democrats demand a reduction in ICE's scale or, at the very least, the attachment of strict restrictive measures.

The Republican stance is directly opposed: The Minnesota welfare fraud case involved $9 billion, with most defendants being of Somali descent. This precisely demonstrates the need to strengthen, not weaken, immigration enforcement. ICE is a key force in combating illegal immigration and welfare fraud and must be fully funded.

This opposition has directly led to a deadlock in Congress over the DHS appropriations bill, which includes ICE funding. This topic may even continue as political "ammunition" until the midterm elections at the end of the year, becoming one of the core battlegrounds.

The Age-Old Debate Over "Obamacare"

Beyond ICE funding, the issue of healthcare subsidies constitutes the second, and more "structural," point of divergence in the current risk of a U.S. government shutdown. This controversy is also a leftover issue from the previous shutdown that was temporarily shelved and remains unresolved: whether to continue increasing subsidy budgets for the "Affordable Care Act" (ACA, commonly known as Obamacare).

These subsidies were initially introduced as temporary measures during the COVID-19 pandemic, significantly reducing the actual cost of health insurance for middle- and low-income individuals through tax credits. They were not made permanent after the pandemic and officially expired at the end of last year. Due to the failure of Democrats and Republicans to reach an agreement on funding authorization, this issue was "frozen" during the last government shutdown but did not disappear; it was merely postponed until now.

Democrats hope to increase the budget. If the subsidies are not renewed, millions of Americans' health insurance premiums will sharply increase in the short term, potentially forcing them out of the insurance system entirely. However, Republican opposition reasons are similar to the background and causes of the Minnesota welfare fraud case. The healthcare subsidy system during the pandemic has already fostered systemic fraud. The ACA subsidies are not just a fiscal burden issue but a "gray pool of funds" abused by local non-profits, insurance agencies, and even political networks.

Politics affects people's livelihoods, and people's livelihoods also affect politics.

The period during which the two parties are contesting the finalization of this healthcare budget is intricately connected to various highly discussed events on the internet.

For example, the theory of the "American execution threshold" that recently sparked heated discussion in Chinese-language communities: A large number of American families are not in abject poverty; they have jobs, income, and health insurance, but their financial safety margins are extremely thin. Once faced with unemployment, serious illness, accidental injury, or the expiration of health insurance subsidies and rising premiums, a family's cash flow can be "drained" in an extremely short time, falling into an unsalvageable zone. Mortgage defaults, credit card delinquencies, and snowballing medical bills almost happen simultaneously. Like a character in a game, once health points fall below a critical threshold, it doesn't require a combo; a single critical hit can directly "execute" them, knocking them out of the game.

And ACA subsidies are precisely the last buffer layer for many families to avoid triggering this "execution threshold." They don't make people wealthy but can prevent them from falling out of the system entirely after an illness or a layoff. This is also why Democrats describe the subsidy issue as an "affordability crisis," not "welfare expansion."

It is precisely against this social backdrop that the case which once ignited public opinion—a 26-year-old third-generation Ivy League graduate shooting the CEO of America's largest insurance company—resonated with the American public's imagination of a modern "folk hero."

The suspect Luigi, who shot the CEO

The symbolically targeted insurance company CEO became a sacrificial victim. The healthcare issue is no longer just a policy debate; it is eroding the foundational sense of security in society.

When people begin to use extreme events to express despair with a system, it indicates that the space for discussion around that system has become severely unbalanced. And the battle over ACA subsidies has been pushed onto the intersection of Congress, elections, and government shutdowns in precisely this state of imbalance.

Will This Shutdown Hit the Crypto Market Again?

So, will the impact of this potential U.S. government shutdown cause another crypto market crash like the last one?

We believe there will still be a negative impact, but the severity might not be as high as last time.

The main reason is that Congress has already passed 6 of the 12 annual appropriations bills. This means that if a comprehensive agreement is not reached by the end of January, any shutdown would be a "partial shutdown," not a full one. Compared to the October 2025 shutdown, this is a fundamental difference.

The last shutdown resulted from a complete failure of the budget system, lasting 43 days and setting a historical record. This time, even if it occurs, it would primarily affect the Department of Homeland Security and a few other departments whose funding hasn't been approved. Furthermore, it seems the crypto market has already priced this in to some extent, having declined in advance. Related reading: "Why Bitcoin Keeps Falling".

Additionally, the impact of this potential government shutdown on the crypto industry might also manifest at the institutional level.

Once a budget deadlock persists, all political energy in Congress will be forced to focus on the lowest-priority goal of "avoiding a full shutdown." Other issues—especially those requiring bipartisan coordination and involving complex technical details—will be systematically shelved. Among the most critical is the "Digital Asset Market Clarity Act," which is highly anticipated by the crypto industry.

The significance of this bill lies not in short-term stimulus but in providing institutional certainty: clarifying whether digital assets are securities or commodities, delineating the regulatory boundaries between the SEC and CFTC, and providing a compliance anchor for exchanges, DeFi projects, and institutional capital.

The bill already passed the House in July and was originally hoped to enter Senate consideration in January. However, if the government falls into another shutdown, this timeline is highly likely to be pushed back again.

This wouldn't immediately depress crypto prices, but it would delay the pace of institutional capital entry and weaken the certainty of medium-to-long-term narratives.

Overall, even if the U.S. government enters another shutdown in January, its direct impact on financial markets, especially cryptocurrency prices, is unlikely to replicate the magnitude of the last round's volatility. The current shutdown risk is highly anticipated, and its scale is more limited.

However, we can see more of a "prelude" to the year-end midterm elections in this potential U.S. government shutdown event.

Whether it's ICE funding, ACA healthcare subsidies, or the tug-of-war over welfare fraud and healthcare affordability, these controversies themselves are highly relevant to voters' daily lives and easily transformed into clear, opposing, and transmissible political narratives. The government shutdown is evolving from a budget failure event into a political battlefield laid out in advance by both sides for the year-end midterm elections, setting the tone for the political and policy direction in the coming months.