Politicians in the United States are likely to reach an agreement and raise the government’s $31.4 trillion debt ceiling for two more years. Amidst this debate, Bitcoin’s price is steady but lower, below the psychological $30,000 level as bulls recover from the sharp losses seen mid-week.
Debt ceiling debate
There are reports that as other sectors are cut there will be more discretionary spending for the military and veterans.
In addition, there are unconfirmed reports that the Biden administration is unlikely to fund the Internal Revenue Service (IRS) to boost tax collection, as previously outlined.
Instead, the immediate focus will be on hiring more accountants and targeting wealthy citizens.
There are concerns that the Treasury Department and the United States government will default on their commitments as early as the first half of June 2023.
Although highly unlikely given that the Treasury has announced it will start paying off $119 billion in debt that day, the market is watching the outcome of the discussions.
Bitcoin is firming up after May 24 losses.
Bitcoin price on May 26| Source: BTCUSDT on Binance, TradingView
Once an agreement is reportedly reached and consensus reached, politicians would raise the debt ceiling again, sending mixed signals to the economy.
Unlike previous years when the top cryptocurrencies were decoupled from the mainstream economy, things have changed with Bitcoin’s increasing importance.
Will Bitcoin benefit from this?
BTC prices are likely to rise if there is a default caused by politicians disagreeing on how to proceed.
On the other hand, a deal that addresses the concerns of the negotiating parties could signal confidence in the economy even though there is still more debt on the table.
This will avert a crisis and keep operations running, eliminate uncertainty and stabilize the economy.
In that case, the USD could strengthen, potentially erasing the gains made by bitcoin bulls over the past two trading days.
Nonetheless, the crypto community remains bullish on Bitcoin given the macro events and next year’s halving.
After months of steady rate hikes, the US Federal Reserve could slow rate hikes at the next meeting in mid-June. Your actions could support the commodity and securities markets.
At the same time, the expected supply shock following the Bitcoin miner rewards halving could make BTC more scarce and push prices even higher.
Miners are special nodes tasked with confirming transactions and decentralizing the network.
If past price movements can be used to predict future developments, the outlook for BTC is positive. Ahead of the 2020-2021 rally, BTC prices bottomed in 2018 and surged in 2019 ahead of the 2020 halving event.
The same pattern could repeat itself until 2024 when the Bitcoin halving takes place.
Featured image by Canva, chart by TradingView
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