Bitcoin’s price plunged at the start of the week. However, it significantly recovered losses through a weekend rebound, stabilizing near $106,000 mark. The weekly decline, which had approached -10%, ultimately closed at -4.99%.
The rebound was driven by news of an imminent end to the US government shutdown and a social media post from President Trump.
‘Big Short’ Rumors Triggered Initial Plunge
The initial drop was sparked by deteriorating sentiment in the US stock market. On Tuesday, news broke that famous bear Michael Burry had established a $1.2 billion short position in AI stocks like Nvidia (NVDA) and Palantir (PLTR). This news encouraged skeptical investors to sell, leading to declines across all three major US stock indexes.
Despite the fundamental issue lying with AI equities, the crypto sector saw a steeper decline: BTC fell approximately 5% that day, while altcoins recorded even higher losses.
On-chain analysts attributed the sharp drop to an exodus of institutional investors. Major players had been reducing crypto positions since the October 10 “Black Friday” crash. Subsequently, the Tuesday stock market turbulence caused the already fragile supply-demand balance to collapse.
The market imbalance worsened quickly, pushing Bitcoin below the psychological $100,000 support on Wednesday, to a low of $99,000.
365-Day MA Holds as Critical Support
Analysts watched nervously, knowing a further drop would break the 365-day Moving Average (MA) line — a critical inflection point often marking the start of a bear market.
Fortunately, the current drop did not breach this line. Bitcoin found support and rebounded, successfully holding the 365-day MA as it had during two previous crises: the August 2024 Yen carry-trade unwinding and the April 2025 tariff crisis.
Ethereum (ETH), the second-largest crypto, plummeted to $3,100 on Wednesday. However, it recovered alongside Bitcoin, rising above the $3,600 level by Sunday, though its weekly loss stood at -6.55%.
Shutdown Resolution Becomes the Primary Catalyst
During the prolonged slump, analysts actively hoped for the end of the month-long US government shutdown. This was because the shutdown was widely believed to be reducing market liquidity by halting government spending.
The shutdown has resulted in approximately 750,000 federal employees being furloughed and a nearly 10% surge in flight delays due to pay suspensions for air traffic controllers. Ultimately, this has disrupted essential support programs.
Raoul Pal, founder of RealVision, argued that the halt in US fiscal policy was worsening market liquidity, with the crypto sector bearing the brunt. He predicted the shutdown’s resolution would be a powerful potential catalyst for a bullish reversal.
