Bitcoin battles around $88,000… U.S. government shutdown fears and FOMC caution weigh on sentiment

Bitcoin (BTC) slid below $88,000 intraday at one point, extending its downtrend. Growing concerns over a potential U.S. government shutdown combined with caution ahead of the Federal Open Market Committee (FOMC) meeting, adding to the pressure across risk assets.

According to Crypto Valley Journal, a cryptocurrency-focused U.S. outlet, Bitcoin traded around $87,800 intraday on the 26th. It was down about 1.5% over the past 24 hours, while Ethereum hovered near $2,930. Bitcoin has given back most of its year-to-date gains since last week.

Political uncertainty out of Washington is being cited as the immediate trigger for the pullback. With the federal budget deadline approaching on the 30th of this month, a partial shutdown is being discussed if Congress fails to reach an agreement. While the actual probability of a shutdown fell sharply after the House passed a budget bill, lingering uncertainties—including a Senate vote—mean market caution has not fully dissipated.

Derivatives markets also saw continued liquidation pressure. On the 21st, as Bitcoin dropped toward $89,000, position liquidations topped $1 billion in a single day. Over the past 24 hours, about $224 million in long positions were also unwound. Of that, Bitcoin futures accounted for about $68 million and Ethereum futures about $45 million.

A shift in safe-haven demand toward gold is also weighing on Bitcoin. International gold prices recently topped $5,000 per ounce for the first time. With geopolitical tensions, inflation concerns and uncertainty over the Fed’s policy path converging, funds appear to be rotating into gold. By contrast, Bitcoin is being viewed as losing momentum for now in the “digital gold” narrative.

On-chain indicators are also sending mixed signals. Long-term holders are increasing selling into rebounds, while more recent entrants continue to lock in losses. With overhead supply still a headwind, the prevailing view is that a return to $100,000 will be difficult in the near term.

Another key focus is the FOMC meeting scheduled for the 28th–29th. The policy rate currently stands at 3.5–3.75%, and markets see a high likelihood of rates being left unchanged at this meeting. As several Fed officials with hawkish leanings have recently voiced caution about rate cuts, sensitivity to the policy message has risen further.

Spot Bitcoin ETF flows remain resilient but are losing momentum. Assets under management for U.S.-listed spot Bitcoin ETFs total about $128 billion, roughly 3% of total supply. However, net outflows and declining trading volumes over the past week have led to interpretations that institutional demand is pausing.

In the market, analysts argue that near-term support around $87,000 is the key test. If a government shutdown materializes, increased volatility would be unavoidable, though some assessments suggest the impact could be limited based on past cases. Expectations are also growing that the tone of Fed commentary and tech earnings will likely shape the broader direction of risk assets.