Last October, the U.S. government shutdown lasted for 43 days, tightening global financial liquidity and causing a significant drop in the cryptocurrency market.

Many people still vividly remember that event. And at the end of this month, a similar situation may occur again.

Three days ago, Trump stated in an interview in Davos, "I think we have trouble again, and we are 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 difficult to avoid.

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

The main points of contention between the two parties now focus on ICE funding and Obamacare funding. This is also a long-standing contentious issue between the two parties: immigration policy and social welfare. To further understand why the government may shut down, we need to start with one of the largest welfare fraud cases in U.S. history that occurred in Minnesota.

Everything Starts with Minnesota

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

The story begins with the outbreak of the pandemic in 2020. The U.S. has a traditional welfare policy: providing free lunches for children from low-income families. Before the pandemic, this welfare was strictly regulated; children had to eat together at school or in formal community centers, and attendance was taken to prevent fraud. But when the pandemic hit and schools closed, children stayed at home. So, Congress waved its hand and changed it to allow takeout without strict reviews. As long as you are a registered nonprofit organization claiming to have distributed a certain amount of food, the government would provide funding, with no upper limit.

This loophole was the backdrop for the Minnesota welfare fraud case, which was exposed by a U.S. social media influencer, Nick Shirley.

In December 2025, Nick Shirley released a 42-minute investigative video that "went viral overnight." In the video, he revealed a number of nonprofit organizations masquerading as "child nutrition" and "vulnerable group assistance" that applied for funding from state and federal governments, claiming to serve thousands of clients, while in reality, many of these children did not exist, and the meals for children were also nonexistent; the so-called public welfare projects were merely shells to siphon off government funding.

After the video was released, it quickly spread, garnering tens of millions of views within the first 24 hours, and with various short video clips and shares, the overall reach exceeded 100 million. Following the event'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 projects in Minnesota, with the amount involved in the fraud reaching as much as $9 billion. It is one of the largest welfare fraud cases in U.S. history.

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

Minnesota has long been a solid stronghold for the Democratic Party, and the Democratic governor was once a running mate of Harris. It is also a state that heavily relies on welfare programs and has a dense network of nonprofits. The welfare system here has formed a structure of "outsourced governance" over the past decade: the government does not directly provide services but instead delegates many public functions to nonprofit organizations. Theoretically, this is for efficiency and community autonomy; but in reality, it has created an extremely lax, poorly regulated, and politically entangled gray area.

Many of the organizations involved are closely linked to the local Democratic political ecosystem. There is evidence that a significant portion of the funds obtained by these welfare fraud organizations ended up in donations to Democratic campaign funds.

At the same time, Minnesota itself is a highly immigrant state, with a large population of Somali immigrants. The Minnesota Attorney General's office stated that among the 92 defendants charged in this case, 82 are Somali Americans. This intertwines immigration enforcement, welfare distribution, and public safety issues, hitting the core topics of long-standing opposition between the Democratic and Republican parties, and is also a key policy commitment repeatedly emphasized by Trump and the Republican Party during the campaign.

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

The biggest "internet celebrity" in America, Trump, along with Musk, frequently shared related content, harshly criticizing Minnesota's handling of the situation and linking these opaque, potentially abused 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 increased immigration enforcement efforts in Minnesota. The DHS and FBI dispatched numerous agents to continue investigations and sweep operations against illegal immigrants, with ICE (Immigration and Customs Enforcement) as the main force in this operation.

However, the sudden increase in enforcement efforts soon led to serious consequences.

On January 7, ICE agents accidentally shot and killed a 37-year-old woman, Renée Good, during a local operation, drawing national attention. Just 17 days later, on January 24, another American citizen, Alex Pretti, was shot dead by federal immigration enforcement personnel in the area.

These two consecutive fatal shootings caused the situation in Minnesota to spiral out of control. Large-scale protests and riots erupted locally, and even the National Guard was deployed to maintain order. The Democratic Party quickly seized this opportunity to use the fatal shootings by ICE in Minnesota as ironclad evidence of the agency's out-of-control enforcement methods.

Citizens spontaneously mourn the victims shot by law enforcement

So, how does this affect the U.S. government shutdown on January 31?

In the U.S. constitutional system, the purse strings are held by Congress, and 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 appropriations bills determine how much money each department can spend at most during that fiscal year and where it can be spent. If the appropriations proposal is not passed, or if the legal authorization for the fiscal year expires and Congress fails to pass new authorization in time, the department has no budget and must shut down. This is what is known as a government shutdown.

The normal process starts on October 1 for the fiscal year. If an agreement is not reached before October 1, Congress first passes a temporary appropriations bill to keep the government running, setting a new deadline. The January 30 date we are currently focused on is the expiration date of this temporary bill. By that day, if the formal appropriations bill has not been passed and the temporary bill has not been extended, the U.S. government will shut down, or partially shut down.

Passing these appropriations bills requires both the House of Representatives and the Senate to approve them in sequence. Currently, the House has completed its signing, but the process is stuck in the Senate.

The U.S. Senate requires 60 votes to pass government appropriations bills. Currently, the Senate's seat structure is: 53 Republican seats, 45 Democratic seats, plus 2 independent senators allied with the Democrats, making a total of 47 votes for the Democratic camp. Even if the Republicans "unanimously agree," they only have 53 votes and cannot unilaterally gather enough 60 votes to end debate.

This means that as long as the Democrats choose to collectively obstruct, the Republicans must seek at least 7 votes from the Democratic camp to allow the appropriations bill to enter the final vote and thus avoid a government shutdown. This is also why Trump has been advocating for the abolition of the "60-vote" procedural threshold for the past six months.

So, in this context, the current funding negotiations involving the risk of a government shutdown, including the budget for the Department of Homeland Security, which includes ICE, have become the most controversial and difficult to reach consensus on.

Many voices supporting the ICE enforcement agency on social media

The Democratic logic is clear: ICE caused two deaths in Minnesota, which proves that the agency's enforcement methods have serious problems. Why should we continue to fund it without substantial reforms to ICE and adding strict restrictions? The Democrats demand a reduction in the size of ICE or at least the addition of strict limitations.

The Republican position is sharply opposed: the Minnesota welfare fraud case involves $9 billion, and most of the defendants are Somali, which precisely indicates the need to strengthen rather than weaken immigration enforcement. ICE is a key force in combating illegal immigration and welfare fraud and must be adequately funded.

This opposition has directly led to the Department of Homeland Security's appropriations bill, which includes ICE funding, becoming deadlocked in Congress. This topic may even serve as a "weapon" in party disputes, continuing until the midterm elections at the end of the year and becoming one of the core battlegrounds.

The Old Chestnut of "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 dispute is also a lingering issue that was temporarily shelved during the last government shutdown and has yet to be truly resolved: whether to continue increasing the subsidy budget for the "Affordable Care Act" (commonly known as Obamacare).

These subsidies were initially introduced as temporary measures during the COVID-19 pandemic, significantly reducing the actual costs of health insurance for low- and middle-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 the Democrats and Republicans to reach an agreement on funding authorization, this issue was "frozen" during the last government shutdown but did not disappear; it has simply been dragged into the present.

The Democrats hope to increase the budget; if the subsidies are not renewed, millions of Americans will see their health insurance premiums skyrocket in the short term, and some may be forced to exit the insurance system entirely. However, the Republicans' opposition is also related to the background and reasons for the Minnesota welfare fraud case; the healthcare subsidy system during the pandemic has already bred systemic fraud. The ACA subsidies are not just a financial burden issue but a "gray funding pool" abused by local nonprofits, insurance companies, and even political networks.

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

During the period of contention over this healthcare budget, there are intricate connections with events that have sparked heated discussions online.

For example, the recently discussed "American Kill Line" theory in the Chinese community: many American families are not destitute; they have jobs, income, and health insurance, but their financial safety margins are extremely low. Once they encounter unemployment, serious illness, or unexpected injuries, or when healthcare subsidies expire and premiums rise, their family cash flow can "run dry" in a very short time, falling into an irretrievable situation. Mortgage defaults, credit card delinquencies, and skyrocketing medical bills almost happen simultaneously. It's like a character in a game; once their health drops to a critical value, they don't need a combo; just one critical hit will "kill" them out of the game.

The ACA subsidies are precisely the last buffer for many families to avoid triggering this "kill line." They do not make people wealthy but prevent them from falling out of the system after a single illness or layoff. This is why the Democrats describe the subsidy issue as an "affordability crisis" rather than "welfare expansion."

It is also against this social backdrop that the case that once ignited public opinion: a 26-year-old heir to a wealthy family and Ivy League graduate shot the CEO of the largest insurance company, resonates with the American public's imagination of a modern "folk hero."

The suspect in the CEO shooting, Luigi

The symbolized insurance company CEO became a victim. Healthcare issues are no longer just policy debates but are eroding the underlying sense of security in society.

When people begin to use extreme events to express their despair with a system, it indicates that the discussion space around that system has become severely imbalanced. The ACA subsidy dispute has been pushed to the intersection of Congress, elections, and government shutdowns in this state of imbalance.

Will This Shutdown Hit the Crypto Market Again?

So, will the impact of this U.S. government shutdown cause a drop in the cryptocurrency market like the last time?

I believe there will still be negative effects, but the extent may not be as severe as last time.

The main reason is that Congress has already passed 6 of the 12 annual appropriations bills. This means that if an overall agreement is not reached by the end of January, the shutdown will be a "partial shutdown" rather than a complete shutdown. Compared to the shutdown in October 2025, this is a fundamental difference.

The last shutdown was a complete failure of the budget system, lasting 43 days and setting a historical record; whereas this time, even if it occurs, it will mainly target the Department of Homeland Security and a few departments that have not yet received approved funding. Currently, it seems that the cryptocurrency market has already anticipated this and has declined in advance. Related reading: "Why Bitcoin Keeps Falling."

Furthermore, the impact of this government shutdown on the cryptocurrency industry may also manifest at the institutional level.

Once the budget deadlock continues, all political energy in Congress will be forced to focus on the minimum priority goal of "avoiding a complete shutdown," while other issues—especially those requiring bipartisan coordination and complex technical details—will be systematically shelved. The most critical of these is the "Clarity Act," which is highly anticipated by the cryptocurrency industry.

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

The bill has already passed the House in July and was originally expected to enter the Senate for review in January. However, if the government shuts down again, this timeline is very likely to be pushed back once more.

This will not immediately depress cryptocurrency prices but will delay the pace of institutional capital entering the market, weakening the certainty of mid- to long-term narratives.

In summary, even if the U.S. government shuts down again in January, its direct impact on financial markets, especially cryptocurrency prices, is unlikely to replicate the magnitude of the previous shock. The current risk of a shutdown has been highly anticipated, and its scale is more limited.

However, we can see more "preludes" to the midterm elections at the end of the year in this U.S. government shutdown event.

Whether it is ICE funding, ACA healthcare subsidies, or the tug-of-war surrounding welfare fraud and healthcare affordability, these controversies are closely tied to voters' daily lives and can easily be transformed into clear, opposing, and shareable political narratives. The government shutdown is evolving from a budget failure event into a political battleground for both sides to lay the groundwork for the midterm elections at the end of the year, setting the tone for the political and policy direction in the coming months.

Original link