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- Bitcoin (BTC) dips below $28,000 amid uncertainty over the U.S. debt ceiling progress.
- Anticipation builds as the House prepares to vote on the debt ceiling deal, which could have implications on Bitcoin’s performance.
Bitcoin Performance Amid Debt Ceiling Discussions
As the U.S. House of Representatives prepares to vote on a critical debt limit deal, the value of Bitcoin, the largest cryptocurrency by market capitalization, wavers. During U.S. trading hours on Tuesday, Bitcoin’s price slipped below $28,000 before regaining some stability. The cryptocurrency was last noted trading at around $27,740, marking a marginal 0.1% increase over the past 24 hours, despite a slight drop from its higher position earlier in the day, according to CoinDesk data.
Debt Ceiling Suspension Agreement Impact on BTC
Over the weekend, Bitcoin had risen above $28,000 for the first time in nearly three weeks. This followed an agreement between U.S. President Joe Biden and House Speaker Kevin McCarthy to suspend the nation’s debt ceiling until January 1, 2025. This move prevents the U.S. from defaulting on its obligations as early as June and implies that the U.S. Treasury could potentially issue around $1 trillion of debt to refill its Treasury General Account.
“Typically, when governments issue debt that takes their debt to GDP at uncomfortable levels, that should be good news for crypto. However, a number of crypto companies might face challenging financing options over the next year,”
noted Edward Moya, senior market analyst at foreign exchange Oanda.
Bitcoin and Monetary Policy Expectations
Simultaneously, traders have shifted their expectations for a more dovish monetary turn by the U.S. Federal Reserve. The CME FedWatch Tool indicates a 66% probability that the Fed will increase interest rates by 25 basis points for the fourth consecutive time at its June meeting, a substantial jump from the 28% expectation a week ago.
Dessislava Ianeva, a research analyst at crypto data firm Kaiko, observed that Bitcoin has largely moved in line with liquidity trends. She suggested that future rate hikes combined with quantitative tightening could potentially dampen the prospects of a significant market-wide rally.
Bitcoin’s Resilience Amid Monetary Tightening
However, Ianeva also noted that other narratives, such as store-of-value, NFTs, and technical factors like supply/demand and liquidity, have been increasingly driving Bitcoin markets this year. She expressed confidence that unlike the previous year, Bitcoin could demonstrate resilience amidst further monetary tightening.
In other digital asset news, ether (ETH) experienced a slight rise, while XRP and Filecoin’s FIL token saw a more substantial growth.
Anticipation for the House Vote
The House’s upcoming vote on the debt ceiling deal remains a critical focal point, with some hardline conservatives expressing their opposition to the package and several progressive Democrats yet to pledge their commitment. A positive agreement following the vote could potentially impact the market favorably in the short term, according to Vetle Lunde, a senior analyst at K33 Research.