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 U.S. government shutdown have on Bitcoin?)

Table of Contents

• Everything starts in Minnesota
• The old familiar “Obamacare”
• Will this shutdown hit the crypto market again?

Last October, the U.S. government shutdown lasted 43 days, causing a sharp drop in the crypto market amid tightening global financial liquidity.

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’re in trouble again, very likely to 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 divide between the two parties mainly revolves around 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 happened in Minnesota.

Everything starts in Minnesota

U.S. federal agents investigate fraud 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 checks to prevent fraud. But when schools closed and children stayed at home, Congress quickly changed the rules, allowing meals to be packed and taken away without strict oversight. As long as a registered nonprofit claimed to distribute a certain amount of food, the government would pay, with no cap.

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

In December 2025, Nick Shirley released a 42-minute investigative video titled “Viral Overnight.” He exposed a group of nonprofits claiming to provide “child nutrition” and “aid to vulnerable groups,” which applied for funds from state and federal governments. Their books 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, with initial views surpassing tens of millions within 24 hours. Combined with 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 involved funds reaching 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. The Democratic governor was once Harris’s running mate. The state relies heavily on welfare programs and nonprofit organizations. Its welfare system has developed a “outsourced governance” structure over the past decade: the government does not directly provide services but delegates many functions to nonprofits. Theoretically for efficiency and community autonomy; in reality, it has created a loose, weakly regulated, highly entangled political 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, hitting the core of long-standing Democratic-Republican conflicts and aligning with Trump and the Republican Party’s repeated campaign promises.

Since someone handed them a knife, the Republicans naturally chose to stab deeply.

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.

Because of the exposure of Minnesota’s welfare fraud case, Trump significantly increased immigration enforcement in Minnesota. DHS and FBI dispatched many agents to continue investigations and illegal immigrant sweeps, with ICE (Immigration and Customs Enforcement) leading the operation.

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, using the ICE shootings as evidence 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 authorization expires and Congress does not pass a new one, that 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 before then, Congress passes a temporary funding bill to keep the government running, with a new deadline. The current focus is on the January 30 deadline, which is the expiration of this temporary bill. If by then no full appropriations are passed and the temporary bill is not extended, the government must either partially or fully shut down.

These appropriations require approval from both the House and Senate. The House has already signed off; the process is stuck in the Senate.

The Senate requires 60 votes to pass a funding bill. Currently, the Senate has 53 Republicans, 45 Democrats, 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 collectively oppose, Republicans need to secure at least 7 votes from Democrats to pass the bill and avoid a shutdown. This is why Trump has been advocating to eliminate the “60-vote” requirement for months.

In this context, the most contentious and hardest-to-reach part of the current funding negotiations is the DHS budget, including ICE.

Many social media voices support ICE law enforcement

Democrats’ logic is clear: ICE caused two deaths in Minnesota, proving its law enforcement approach has serious problems. Without substantial reforms and stricter restrictions, why should we keep funding it? Democrats demand cuts to ICE or at least strict limitations.

Republicans take the opposite stance: the Minnesota welfare fraud 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 on the Homeland Security appropriations bill, which includes ICE funding. This issue could even become a partisan “ammunition” for the midterm elections at the end of the year, becoming a key battleground.

The old familiar “Obamacare”

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

These subsidies were initially introduced as temporary measures during the COVID-19 pandemic, significantly lowering 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 to leave the insurance system altogether. But Republicans’ opposition is similar to the background of 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 dispute over this healthcare budget, many events widely discussed online are closely related.

For example, the “U.S. kill line” theory that caused heated debate 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. Foreclosures, credit card defaults, 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 “kill line.” They don’t make people wealthy, but they prevent a single illness or layoff from pushing them out of the system. That’s why Democrats describe the subsidy issue as a “cost of living crisis,” not just welfare expansion.

In this social context, the case 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—satisfies the American public’s imagination of a modern “civilian hero.”

Suspect Luigi who shot the CEO

The symbolized insurance CEO became a sacrificial figure. Healthcare issues are no longer just policy debates—they are eroding the social sense of security at a fundamental level.

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, pushed to the intersection of Congress, elections, and government shutdowns.

Will this shutdown hit the crypto market again?

Will the impact of this U.S. government shutdown be as severe as the last one, causing a market crash?

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

The main reason is that Congress has already passed 6 of the 12 annual appropriations bills. This means that if no overall agreement is reached by the end of January, the shutdown will be partial, not 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 happens, it will mainly target DHS and a few departments that have not yet received funding. Currently, the crypto market seems to have anticipated this and has already declined in advance. Related reading: “Why Bitcoin Keeps Falling.”

Additionally, this shutdown could have systemic implications for the crypto industry.

If the budget deadlock persists, Congress’s political focus will be forced onto the “minimum priority” of avoiding a full shutdown. Other issues—especially complex, bipartisan legislation—will be systematically sidelined. The most critical 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 capital.

The bill passed the House in July and was expected to enter Senate review in January. But if the government again shuts down, this schedule is very likely to be delayed again.

This won’t 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 crypto prices, is unlikely to replicate the previous turbulence. The current shutdown risk has been highly anticipated and is more limited in scale.

However, we can see this event 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 linked to voters’ daily lives and are easily transformed into clear, polarized, and propagandistic political narratives. The government shutdown is evolving from a budget failure event into a political battlefield prepped by both sides for the midterm elections, setting the tone for the political and policy directions in the coming months.