Bitcoin Liquidity Thins as US Govt Shutdown Drives an On-Chain Flight to Stablecoins

Rising bitcoin reserves, miners selling their holdings, and stablecoin exits show a widespread de-risking, analysts say.

Bitcoin liquidity is drying up as the ongoing US government shutdown enters its second month, freezing federal flows and shaking cryptocurrency prices.

This financial gridlock is causing a major shift in investor behaviour, pushing capital towards the perceived safety of stablecoins and away from more volatile digital assets.

Data on the chain indicates defensive moves

Analysis by XWIN Research Japan indicates that the ongoing US government shutdown is becoming clear Disturbances In the cryptocurrency markets, where key Bitcoin metrics are showing warning signs. Their data shows that the amount of Bitcoin held on exchanges increased for the first time in six weeks, a move that often signals that investors are preparing to sell.

Meanwhile, major cryptocurrency miners are under pressure, with their collective reserves falling to the lowest point since mid-2025, suggesting they are likely to offload parts of their holdings to cover costs as government energy subsidies and tax breaks remain suspended.

However, the most telling signal is the index number Stable coin Withdrawal transactions from trading platforms, with XWIN describing it as a collective move towards “dollar-pegged security.”

In his assessment, this three-part pattern of rising exchange reserves, falling miner reserves, and record stablecoin exits paints a consistent picture: a widespread retreat from speculative assets.

“Capital is moving away from risk, and cross-chain liquidity is shrinking,” the research platform wrote.

Investor sentiment has also deteriorated significantly, reflecting this shift. The Fear and Greed Index has fallen back into “extreme fear” territory, levels last seen during the 2023 banking liquidity crisis, reflecting deep anxiety across the trading landscape.

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Now, XWIN analysts suggest that although a temporary rebound is likely when the financial standoff ends, on-chain data suggests that it could take some time before capital and confidence return to pre-lockdown levels.

“For Bitcoin, this period is not a simple buy dip — it is a stress test of conviction, liquidity, and patience in a market shaped by financial dysfunction,” they noted.

A market full of dry powder and fear

While on-chain activity slows, a separate data point from market watcher JA Maartunn adds a layer of complexity. He noted that stablecoin inflows to Binance had occurred He hits A record $7.3 billion over 30 days, a level not seen since December 2024, just before Bitcoin surged from an all-time high of $67,000 to $108,000.

According to him, the trend indicates that traders are stockpiling “dry powder” for future opportunities, which could lead to increased volatility when deployed.

However, this accumulation of potential purchasing power exists alongside the market in some Ordeal. In the past 24 hours, the total market capitalization of cryptocurrencies fell by 4.0% to $3.54 trillion. Bitcoin itself is down 3.3%, trading around $104,100 at the time of writing, while major altcoins like Ethereum and Solana have seen larger declines of more than 6.2% and 11.1%, respectively.