Bitcoin Drops Below $84K as Political Risk and Fed Rate Decision Weigh on Market Confidence

Bitcoin retreated toward $84,220 during volatile weekend trading on January 29, extending a week-long decline that has seen most major cryptocurrencies face significant selling pressure. The drawdown reflects intensifying concerns over geopolitical tensions, U.S. fiscal negotiations, and approaching Federal Reserve policy decisions that traders are watching closely for market direction cues.

The decline has already triggered substantial liquidations, with over $650 million in forced closures across cryptocurrency leveraged positions during the recent price action. These forced unwinding events typically accelerate losses during periods of thin liquidity, which characterize weekend trading sessions where positioning adjustments dominate over fundamental news flow.

Market Liquidations Spike Amid Volatile Weekend Trading

Bitcoin’s latest leg down has been particularly punishing for leveraged traders. Recent 24-hour data shows approximately $224 million in liquidations, with $68 million concentrated in Bitcoin-tracked futures and $45 million in Ethereum-based derivative positions, according to market tracking services.

Ethereum fell toward $2,810—down 7.07% over the past day—while Solana retreated 6.80% to $117.25. XRP and Cardano each posted losses exceeding 5.90%, reflecting broad-based weakness across the crypto market. Most major tokens remain sharply lower over the seven-day period, with Bitcoin itself down 6.12% from a week ago.

Weekend market moves are frequently driven by leverage unwind mechanics rather than fresh information arrival. Extended periods of elevated positioning leave markets vulnerable to cascading liquidations once key price levels break, creating self-reinforcing downward spirals that amplify initial losses.

Political Uncertainty and Japanese Yen Intervention Add Pressure

Beyond market technicals, political risks are compounding the uncertainty. U.S. Senate Democratic leadership indicated opposition to a major spending package unless Department of Homeland Security funding is restructured, raising the probability of a partial government shutdown by month-end.

Prediction market traders are currently assigning a 76% probability to a government shutdown scenario materializing before February, according to Polymarket data. History shows government fiscal standoffs typically create near-term liquidity tightening and dampen sentiment across risk asset classes, though Bitcoin has historically rebounded after initial capitulation during such events.

In parallel, traders are maintaining heightened vigilance over potential Japanese currency intervention after Tokyo officials issued warnings about “abnormal” yen market moves. The Bank of Japan’s potential involvement—if confirmed—could trigger broader currency volatility with spillover effects into cryptocurrency and equity markets.

Fed Rate Decision and Big Tech Earnings Shape Week Ahead

As traders navigate these macro crosscurrents, the Federal Reserve’s first rate decision of 2026 commands attention. While markets widely expect the Fed to hold interest rates steady, investors are closely monitoring Chairman Jerome Powell’s post-decision commentary for clues about monetary policy trajectory later in the year.

This week also features heavy earnings releases from technology giants including Microsoft, Meta Platforms, Tesla, and Apple—members of the “Magnificent 7” cohort that have dominated market direction. Market participants will scrutinize management guidance on artificial intelligence adoption trends and capital spending plans, as these comments increasingly drive sentiment across risk assets broadly.

Bitcoin is now pricing as a risk asset with high correlation to technology stocks and rate expectations. Should tech earnings disappoint or if Fed officials signal less monetary accommodation ahead, cryptocurrencies could face additional downside pressure in the near term.

Market Outlook: Positioning and Potential Support Levels

Technical indicators are beginning to signal possible capitulation among leveraged longs, suggesting a temporary bottom may be forming. However, sustained recovery may hinge on either a significant shift toward looser monetary policy from central banks or resolution of current political uncertainty.

The coming 48 hours will be critical in determining whether Bitcoin can stabilize above current levels or faces deeper drawdowns toward $80,000. Market participants should watch for confirmation of Japanese intervention, Senate votes on spending legislation, and Fed communications as key catalysts that could either extend losses or catalyze a recovery bounce.