In October of last year, the U.S. government shut down for 43 days, causing a global financial liquidity crunch and a sharp decline in the crypto market.

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

Three days ago, while being interviewed at Davos, Trump said, "I think we have trouble again, and we could very well end up with another government shutdown caused by the Democrats." Although lawmakers are working hard to finalize a funding agreement, with only 4 working days left until the January 30 deadline, another shutdown seems hard to avoid.

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

The current disagreement between the two parties is mainly focused on ICE funding and Obamacare funding. This is also a long-standing controversial topic in the two-party election campaigns: immigration policy and social welfare. To further understand why the government may shut down, we need to start with the largest welfare fraud case in U.S. history that occurred in Minnesota.

It All Starts in Minnesota

Federal agents investigating fraud case in Minnesota

The story begins in early 2020 when the pandemic hit. The U.S. had a traditional welfare policy: providing free lunches to children from low-income families. Before the pandemic, this welfare program was tightly controlled, requiring meals to be consumed at schools or formal community centers, with children dining together, and attendance taken to prevent false claims. However, when the pandemic arrived, schools closed, and children stayed at home. So, the U.S. Congress waved its hand and allowed these meals to be packaged and taken away without strict scrutiny. As long as you were a registered non-profit organization, claimed to have served a certain number of meals, the government would provide funding without a cap.

This loophole was the backdrop for the welfare fraud case in Minnesota, which was exposed by an American independent media blogger, Nick Shirley.

In December 2025, Nick Shirley posted a 42-minute investigative video that "went viral overnight." In the video, he exposed a group of non-profit organizations claiming to provide "child nutrition" and "assistance to disadvantaged groups." These organizations applied for funding from state and federal governments, claiming to serve tens of thousands of beneficiaries on paper. However, many of these children did not exist, the meals were never served, and the so-called public welfare projects were merely a front to embezzle government allocations.

The video quickly went viral, surpassing tens of millions of views within the first 24 hours. Along with various short video clips and reposts, the overall scale of dissemination exceeded one billion. After the incident gained traction, it was investigated by the Department of Homeland Security (DHS) and the Federal Bureau of Investigation (FBI). Since 2018, the federal government has allocated a total of $18 billion to 14 public projects in Minnesota, with the amount involved in the case reaching as high as $9 billion. It is considered one of the largest welfare fraud cases in American history.

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

Minnesota has long been a stronghold of the Democratic Party, and the Democratic governor was once Kamala Harris's running mate. It is also a state highly dependent on welfare programs and unusually dense in nonprofit organizations. The welfare system here has developed a structure of "outsourced governance" over the past decade or so: the government does not directly provide services but instead delegates a large number of public functions to nonprofits. In theory, this is for efficiency and community autonomy; however, in reality, it has created an extremely loose, poorly regulated, and politically intertwined gray area.

Many of the implicated organizations have close ties to the local Democratic Party political ecosystem. Evidence indicates that much of the fraudulently obtained welfare funds were funneled into Democratic campaign donations.

Meanwhile, Minnesota itself is a highly immigrant-populated state, with significant immigrant communities such as the Somali population. The Minnesota Attorney General's Office stated that out of the 92 defendants prosecuted in this case, 82 are Somali-American. This intertwines immigration enforcement, welfare distribution, and public safety issues, hitting right at the core of the long-standing confrontation between the Democratic and Republican parties, which is also a key policy emphasis repeatedly emphasized by Trump and the Republican Party in elections.

Since someone handed them a knife, the Republican Party naturally chose to plunge it in.

The U.S.'s biggest "internet celebrities," Trump and Musk, have frequently reshared related content, harshly criticizing Minnesota's handling of the situation and linking such opaque, potentially abused subsidy policies to the Democratic Party's long-standing social welfare expansion.

Due to the exposure of the Minnesota welfare fraud case, Trump significantly strengthened immigration enforcement in Minnesota. The Department of Homeland Security and the FBI dispatched numerous agents to continue investigations and illegal immigrant sweep operations, with ICE (Immigration and Customs Enforcement) as a law enforcement agency under the Department of Homeland Security leading the charge in this operation.

However, the sudden escalation of law enforcement quickly led to serious consequences.

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

The two consecutive deadly shooting incidents plunged Minnesota into chaos. Large-scale protests and riots erupted in the area, prompting the deployment of the National Guard to maintain order. The Democratic Party quickly seized this opportunity, using ICE's deadly shootings in Minnesota as concrete evidence of the agency's out-of-control enforcement tactics.

Citizens spontaneously mourn the victims shot by law enforcement officers

So, why did this incident lead to a 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 unilaterally decide on spending. Each fiscal year, Congress must pass 12 annual appropriations bills, each corresponding to a different policy area: defense, homeland security, agriculture, transportation, housing, and so on. These appropriations bills determine how much money each department can spend during that fiscal year and where it can be spent. If the appropriations proposals are not passed, or if the legal authorization for the fiscal year expires without Congress having passed new authorization, the department has no budget and must shut down. This is what is known as a government shutdown.

The normal process starts the fiscal year on October 1. If an agreement is not reached by October 1, Congress first passes a temporary funding bill to keep the government running, setting a new deadline. The date we are focusing on now, January 30, is the expiration date of this temporary bill. If by that day the regular appropriations bill has not been passed, and the temporary bill is not renewed, the U.S. government will shut down, either fully or partially.

To pass these appropriations bills, both the House of Representatives and the Senate must approve. Currently, the House has completed its part, and the process is stuck in the Senate.

The U.S. Senate rules require that appropriations bills receive 60 votes to pass. The current Senate composition is: 53 Republicans, 45 Democrats, plus 2 independent senators aligned with the Democrats, totaling 47 votes for the Democratic camp. Even if all Republicans "agree," they only have 53 votes and cannot unilaterally reach the 60 votes needed to end debate.

This means that as long as the Democratic Party chooses to collectively obstruct, the Republican Party must secure at least 7 votes from the Democratic camp to allow the appropriations bill to reach a final vote, thereby avoiding a government shutdown. This is also why Trump has been advocating for the abolition of the "60-vote requirement" threshold for the past half year.

So against this backdrop, in the current appropriations negotiations involving the risk of a government shutdown, the Department of Homeland Security budget, including ICE, has become the most controversial and difficult-to-consensus part.

Many voices supporting the ICE law enforcement department on social media

The Democratic Party's logic is clear: ICE has caused two deaths in Minnesota, demonstrating serious flaws in the agency's enforcement. Without substantive reform of ICE and the addition of strict limiting provisions, why should we continue to allocate funds to it? The Democratic Party is calling for a reduction in the size of ICE or, at the very least, the addition of strict restrictions.

The Republican position is quite the opposite: the Minnesota welfare fraud case involved $9 billion, with the majority of the defendants being of Somali descent, which precisely shows 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 a stalemate in Congress over the Department of Homeland Security budget bill containing ICE funding. This topic may even continue as a partisan "ammunition" all the way to the year-end midterm elections and become one of the core battlefields.

The Evergreen Topic of "Obamacare"

Outside of ICE funding, the issue of healthcare subsidies constitutes the second, and more "structural," point of contention in this round of the U.S. government shutdown risk. This dispute is also a lingering issue that was temporarily shelved during the last government shutdown and has not been truly resolved to this day: whether to continue increasing the subsidy budget for the "ACA 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 purchasing health insurance for middle- and low-income groups through tax credits. They were not made permanent post-pandemic but officially expired at the end of last year. Due to the Democratic and Republican parties' failure to reach an agreement on appropriations, this issue was "frozen" during the last government shutdown but did not disappear; it was merely postponed to now.

The Democratic Party wants to increase the budget. If the subsidies are not continued, the health insurance premiums of millions of Americans will skyrocket in the short term, and they may even be forced to completely exit the insurance system. However, the Republican opposition's reasons are similar to the background and causes of the Minnesota welfare fraud case: the healthcare subsidy system during the pandemic has already bred systemic fraud. The ACA subsidy is not just a financial burden issue but a "gray fund pool" that has been abused by local nonprofits, insurance companies, and even political networks.

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

During the period when the two parties were fighting over this healthcare budget issue, there were intricate connections to highly debated events on the internet.

For example, the recently discussed "American Slashing Line" theory in the Chinese-speaking community: Many American families are not in extreme poverty; they have jobs, income, and health insurance. However, their financial safety margin is very low. Once they face unemployment, a serious illness, accidental injury, or their health insurance subsidies expire or premiums rise, the family's cash flow will "hit zero" in a very short time, falling into an irrecoverable zone. Mortgage defaults, credit card defaults, and escalating medical bills almost happen simultaneously. Like a character in a game, once the health points drop to a critical value, without the need for multiple hits, just one critical hit will directly "eliminate them from the game."

The ACA subsidy is precisely the final buffer for many families to avoid triggering this "slashing line." It cannot make people wealthy, but it can prevent them from falling out of the system directly after one illness or job loss. This is also why the Democratic Party describes the subsidy issue as an "affordability crisis" rather than "welfare expansion."

It is in such a social context that a previously sensationalized case occurred: a 26-year-old Ivy League graduate from a wealthy family shot the CEO of America's largest insurance company, satisfying the American public's imagination of a modern "folk hero."

Suspect Luigi who shot the CEO

The symbolized insurance company CEO became a sacrificial lamb. The healthcare issue is no longer just a policy debate but is eroding the societal sense of security from the grassroots.

When people start to use extreme events to express their despair about a system, it indicates that the discussion space of this system has been severely unbalanced. The ACA subsidy dispute has been elevated to the intersection of Congress, elections, and government shutdown in such an imbalanced state.

Will This Shutdown Crush the Crypto Market Again?

So, will the impact of this U.S. government shutdown be as significant as the last time, causing a crash in the crypto market?

The editor believes there will still be a negative impact, but the extent may not be as severe as last time.

The main reason is that currently, Congress has passed 6 out 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 one. This is a fundamental difference compared to the October 2025 incident.

In the previous shutdown, the entire budget system failed, lasting 43 days and setting a historical record; while this time, if it happens, it is more targeted at the Department of Homeland Security and some departments that have not yet received appropriations. At present, the crypto market seems to have anticipated this and has already experienced a preemptive decline. Related reading: "Why Bitcoin Keeps Falling".

Furthermore, the impact of this government shutdown on the crypto industry may also be reflected at the institutional level.

If the budget deadlock persists, Congress's entire political energy will be forced to focus on the lowest-priority goal of "avoiding a complete shutdown," while other issues—especially bills requiring bipartisan coordination and complex technical details—will be systematically postponed. The most crucial of these is the "Digital Asset Market Clarity Act," which the crypto industry is highly concerned about.

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

The bill passed the House in July and was originally expected to be discussed in the Senate in January. However, if the government shuts down again, this timetable is highly likely to be pushed back once more.

This will not immediately suppress the coin price, but it will slow down the pace of institutional fund entry and weaken the certainty of the medium-to-long-term narrative.

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

However, in this U.S. government shutdown event, we can see more of a "prelude" to the midterm elections.

Whether it's ICE appropriations, ACA healthcare subsidies, or the tug-of-war over welfare fraud and healthcare affordability, these controversies are highly relevant to voters' daily lives and are easily transformed into clear, oppositional, and communicable political narratives. The government shutdown is evolving from a budget failure event into a political battlefield laid out in advance by both sides for the year-end midterm elections, setting an early tone for the political and policy direction in the coming months.

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