Last October, the U.S. government shutdown lasted 43 days, leading to a tightening of global financial liquidity and a sharp decline in the crypto market. By the end of this month, a similar event may occur again.
(Background: End of the U.S. government shutdown = rebound? Analysis of Bitcoin, gold, and U.S. stocks performance after previous reopenings)
(Additional context: What impact would a government shutdown have on Bitcoin?)

Table of Contents

• Everything starts in Minnesota
• The perennial debate: “Obamacare”
• Will this shutdown hit the crypto world again?

Last October, the U.S. government shutdown lasted 43 days, causing a severe liquidity crunch in global markets and a sharp drop in cryptocurrencies.

Many still remember that event vividly. Now, a similar situation might happen again by the end of this month.

Three days ago, Trump said in an interview at Davos: “I think we have trouble again, and it’s very likely we’ll face another government shutdown caused by the Democrats.” Although lawmakers are working hard to finalize a funding agreement, with the January 30 deadline approaching, the U.S. government has only 4 working days left, making another shutdown seem unavoidable.

The probability of a “U.S. government shutdown before January 31” on Polymarket has surged to 80%.

Currently, the main disagreements between the two parties focus on ICE funding and Obamacare funding. These are long-standing contentious issues: immigration policy and social welfare. To understand why the government might shut down, we need to start with the largest welfare fraud case in U.S. history that occurred in Minnesota.

Everything starts in Minnesota

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

The story begins in 2020, when the pandemic first broke out. The U.S. has a traditional welfare policy: providing free lunch for children in impoverished families. Before the pandemic, this welfare was tightly regulated—children had to eat together at schools or community centers, with attendance taken to prevent fraud. But when schools closed due to COVID-19, children stayed at home. Congress quickly responded by allowing meals to be packed and taken away, with less strict oversight. As long as an organization was a registered nonprofit claiming to provide meals, the government would fund it, with no cap on spending.

This loophole was the background for the Minnesota welfare fraud case, uncovered by an American social media influencer, Nick Shirley.

In December 2025, Nick Shirley released a 42-minute investigative video titled “Viral Overnight.” In it, he exposed a group of nonprofits claiming to serve “child nutrition” and “aid to vulnerable groups,” which applied for funds from state and federal governments. The accounts showed thousands of beneficiaries, but in reality, many children and meals did not exist. These so-called public welfare projects were just shells used to siphon government funds.

The video went viral quickly, garnering tens of millions of views within the first 24 hours. With various clips and shares, the total reach exceeded 100 million. After the incident gained attention, DHS and FBI investigations revealed that since 2018, the federal government had allocated a total of $18 billion to 14 public projects in Minnesota, with fraud involving up to $9 billion. It was one of the largest welfare fraud cases in U.S. history.

What makes this case politically explosive is that it happened in Minnesota.

Minnesota has long been a solid Democratic stronghold, and its Democratic governor was once Harris’s running mate. The state relies heavily on welfare programs and nonprofit organizations. Its welfare system has developed over the past decade into a form of “outsourced governance”: the government does not directly provide services but delegates many functions to nonprofits. Theoretically, this aims for efficiency and community autonomy; in practice, it has created a loose, weakly regulated, politically entangled gray area.

Many involved organizations have close ties to local Democratic politics. Evidence suggests that a significant portion of the stolen funds flowed into Democratic campaign contributions.

Meanwhile, Minnesota is also a highly immigrant state, with large Somali and other immigrant communities. The state prosecutor’s office reports that out of 92 defendants in this case, 82 are Somali Americans. This intertwines immigration enforcement, welfare distribution, and public safety issues, touching on core conflicts between Democrats and Republicans, and aligning with Trump and the GOP’s long-standing policy promises.

Since someone handed them a knife, the Republicans naturally chose to drive it in hard.

Both Trump and Elon Musk, the biggest “internet celebrities” in the U.S., repeatedly shared related content, criticizing Minnesota’s handling and linking these opaque, potentially abused subsidy policies to the Democrats’ long-term expansion of social welfare.

Following the exposure of the Minnesota welfare fraud case, Trump significantly increased immigration enforcement in Minnesota. DHS and FBI dispatched numerous agents to continue investigations and conduct illegal immigration sweeps, with ICE (Immigration and Customs Enforcement) leading the effort.

But the sudden intensification of law enforcement soon caused serious consequences.

On January 7, ICE agents accidentally shot and killed a 37-year-old woman, Renée Good, during enforcement. This drew nationwide attention. Just 17 days later, on January 24, another American citizen, Alex Pretti, was shot and killed by federal immigration officers during an operation.

Two consecutive fatal shootings pushed Minnesota into chaos. Large-scale protests and riots erupted, even requiring the National Guard to restore order. Democrats quickly seized this opportunity, framing ICE’s deadly actions in Minnesota as proof of law enforcement out of control.

Citizens spontaneously mourn victims shot by law enforcement

So, why does this matter for the January 31 U.S. government shutdown?

In the U.S. constitutional system, the purse strings are held by Congress; the executive branch cannot decide on its own to continue spending. Each fiscal year, Congress must pass 12 appropriations bills, each covering a policy area: defense, homeland security, agriculture, transportation, housing, etc. These bills determine the maximum spending for each department and what it can be spent on. If a bill is not passed, or if the fiscal year’s authorization expires and Congress does not pass a new one, the department runs out of budget and must shut down. This is the so-called government shutdown.

The normal process begins on October 1. If no agreement is reached by then, Congress passes a temporary funding measure to keep the government running until a new deadline. The current deadline is January 30, which is the expiration date of this temporary measure. If no full appropriations bill is passed by then, and the temporary measure is not extended, the government must partially or fully shut down.

These appropriations bills are supposed to be passed by both the House and Senate. The House has already approved them; the process is now stuck in the Senate.

The Senate requires 60 votes to pass a funding bill. Currently, the Senate has 53 Republican seats, 45 Democratic seats, and 2 independents aligned with Democrats, totaling 47 votes for the Democratic side. Even if all Republicans vote “yes,” they only have 53 votes, which is not enough to reach 60 and end debate.

This means that as long as Democrats choose to block, Republicans need to secure at least 7 votes from Democrats to pass the bill and prevent a shutdown. This is why Trump has been advocating for eliminating the 60-vote requirement for some time.

In this context, the most contentious and hardest-to-reach part of the current funding negotiations involves the Department of Homeland Security, including ICE.

Many social media voices support ICE law enforcement

Democrats’ logic is clear: ICE caused two deaths in Minnesota, proving its law enforcement methods are seriously flawed. Without substantial reforms and stricter restrictions, why should we keep funding it? Democrats are demanding cuts to ICE or at least imposing strict limits.

Republicans take the opposite stance: the Minnesota welfare fraud case involved $9 billion, mostly Somali defendants, which underscores the need to strengthen, not weaken, immigration enforcement. ICE is crucial in fighting illegal immigration and welfare fraud, and must be funded adequately.

This opposition has led to a deadlock in the Senate over the Homeland Security appropriations bill, which includes ICE funding. This issue could become a partisan “ammunition” that persists into the midterm elections at the end of the year, becoming a key battleground.

The perennial debate: “Obamacare”

Beyond ICE funding, the issue of healthcare subsidies forms the second, more “structural” point of contention in this shutdown risk. This is a lingering issue from the previous shutdown: whether to continue increasing the subsidy budget for the “ACA Affordable Care Act” (commonly known as Obamacare).

These subsidies were initially introduced as temporary measures during COVID-19, significantly reducing the actual cost of health insurance for middle- and low-income people through tax credits. They were not made permanent after the pandemic and expired at the end of last year. Due to disagreements between Democrats and Republicans over appropriations, this issue was “frozen” during the last shutdown but has not disappeared; it has just been delayed until now.

Democrats want to increase the budget; if subsidies are not renewed, millions of Americans’ health insurance premiums will spike sharply or they may be forced out of the system altogether. But Republicans’ opposition is rooted in similar reasons as the Minnesota welfare fraud case: the pandemic-era subsidy system has fostered systemic fraud. ACA subsidies are not just a fiscal burden but a “gray fund” exploited by local nonprofits, insurers, and political networks.

Politics affects livelihoods, and livelihoods influence politics.

During the negotiations over this healthcare budget, many issues are intertwined with hot online debates.

For example, the “U.S. death line” theory that has sparked discussion in Chinese communities: many American families are not destitute—they have jobs, income, and insurance—but their financial margins are extremely thin. When faced with unemployment, serious illness, accidents, or expiration of subsidies and rising premiums, their cash flow can “collapse” in a very short time. Mortgage defaults, credit card delinquencies, and medical bills snowball simultaneously. Like characters in a game, once health drops below a critical threshold, a single “critical hit” can eliminate them.

ACA subsidies are precisely the last buffer preventing many families from crossing this “death line.” They don’t make people wealthy, but they prevent a single illness or job loss from pushing them out of the system. That’s why Democrats describe the subsidy issue as a “crisis of affordability,” not “welfare expansion.”

In this social context, the incident that once sparked public outrage—a 26-year-old Ivy League graduate from a wealthy family shooting and killing the CEO of America’s largest insurance company—resonates with the American public’s image of a “modern folk hero.”

Suspect Luigi who shot the CEO

The symbolic insurance CEO became a victim. Healthcare issues are no longer just policy debates—they are eroding the social sense of security.

When people start using extreme events to express despair over a system, it indicates that the discussion space for that system has become severely unbalanced. The fight over ACA subsidies is precisely in this unbalanced state, pushing it into the intersection of Congress, elections, and government shutdowns.

Will this shutdown hit the crypto market again?

Will this U.S. government shutdown cause the same crypto market crash as last time?

I think there will still be negative effects, but probably not as severe as last time.

The main reason is that Congress has already passed 6 of the 12 appropriations bills. This means that if no comprehensive agreement is reached by the end of January, the shutdown will be partial rather than total. This is a fundamental difference from the October 2025 shutdown.

Last time, the entire budget system failed, lasting 43 days and setting a record; this time, even if it occurs, it will mainly target DHS and a few departments that have not yet received funding. Currently, the market seems to have anticipated this and has already declined in advance. Related reading: “Why Bitcoin Keeps Falling.”

Furthermore, this shutdown may also impact the crypto industry at the institutional level.

If the budget deadlock persists, Congress’s political focus will be forced onto the “minimal priority” of avoiding a full shutdown. Other issues—especially complex, bipartisan legislation—will be systematically sidelined. The most critical among these is the “Digital Asset Market Clarity Act,” which the industry is highly concerned about.

The significance of this bill is not short-term stimulus but establishing regulatory certainty: clarifying whether digital assets are securities or commodities, defining SEC and CFTC jurisdiction, and providing compliance anchors for exchanges, DeFi projects, and institutional investors.

The bill was passed by the House in July and was expected to be reviewed by the Senate in January. But if the government again enters a shutdown, this timetable is very likely to be delayed again.

This will not immediately push down crypto prices but will slow institutional capital inflows and weaken the medium- to long-term narrative certainty.

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 previous turbulence. The current shutdown risk has been highly anticipated and is of a smaller scale.

However, this event can be seen as a “prelude” to the midterm elections at the end of the year.

Whether it’s ICE funding, ACA healthcare subsidies, or the tug-of-war over welfare fraud and healthcare affordability, these disputes are closely related to voters’ daily lives and are easily transformed into clear, polarized, and propagandistic political narratives. The government shutdown is evolving from a budget failure into a political battlefield pre-emptively laid out for the midterm elections, setting the tone for the political and policy directions in the coming months.