Does the US government shutdown trigger a liquidity crisis? Raoul Pal warns that the crypto sell-off may not be over

February 2 News, as Bitcoin and mainstream cryptocurrencies continue to decline, the market is beginning to worry whether this downtrend is still in its early stages. Raoul Pal, founder of Global Macro Investor, recently pointed out that the current crypto sell-off is not caused by the industry itself, but by liquidity tightening triggered by the US government shutdown, which is impacting global risk assets.

Raoul Pal stated on X platform that the recent two government shutdowns in the US, combined with the exhaustion of reverse repurchase agreement funds in the financial system by 2024, have created a significant liquidity gap in the dollar, thereby suppressing the crypto market, which was originally in an upward cycle. He believes this macro resistance is likely to ease this week as the funding agreement is implemented, and once the shutdown ends, the key obstacle affecting liquidity will be removed.

He also refuted the market’s attribution of the decline to the nomination of Kevin Warsh as Federal Reserve Chair by Trump. Some voices suggest Warsh is hawkish or that interest rate cuts will be delayed, but Raoul Pal believes such judgments lack basis and emphasizes that Warsh will still implement rate cuts, creating conditions for Trump and Scott Bessent to push for liquidity release in the banking system.

On the funding front, Bitcoin ETFs have recently been under continuous pressure. Over the past two weeks, related products recorded approximately $2.8 billion in net outflows, and since the October high, total assets have fallen by about 31%. Bitcoin prices also briefly dropped to around $76,000, below the average cost basis of US spot Bitcoin ETFs, and institutional de-risking sentiment has further amplified market volatility.

Despite the short-term pressure, Raoul Pal remains confident about 2026. He believes that the current downtrend is more like a phase adjustment caused by liquidity contraction rather than a trend reversal. If the US fiscal and monetary environment gradually recovers, the crypto market is expected to regain funding support, and risk sentiment will improve accordingly.