On a Deal to Suspend the US Debt Ceiling, Bitcoin Gains 4%

The news that the U.S. government had reached a consensus on the debt limit caused BTC to soar to a three-week high.

During the Asian trading session on Monday morning, cryptocurrency markets were up. A debt limit agreement reached by leading congressional Republican Kevin McCarthy and US President Joe Biden has given the movement impetus.

The preliminary deal to raise the $31.4 trillion debt limit for the federal government has not yet been approved by Congress. Bloomberg claims that despite this, it has increased risk appetite in international markets.

A Bitcoin Spike Again

According to John Toro, head of trading at the cryptocurrency exchange Independent Reserve, the settlement of the debt-ceiling crisis is the primary cause of this morning’s favorable risk mood. Front-end financing expenses are still quite high in comparison to cryptocurrency profits, which causes long investors to have a negative carry.

BTC recently climbed to above $28,500, its highest level since May 8. It has now fallen a little, but it is still over $28,000 after an increase of 4% for the day.

However, the longer-term perspective still shows BTC consolidating sideways.

What is Debt Limit

Created by Congress in 1917, The debt ceiling or limit is a statutory limit on the amount of debt that the Treasury may accumulate. There is a limit on how much the federal government may borrow in order to pay off the debt it has already incurred.

Considering that the debt ceiling is presently $31.4 trillion, Treasury Secretary Janet Yellen issued a warning that, without an agreement, a default was quite possible. The agreement would suspend this debt ceiling until January 2025, removing any ceiling on the amount of additional debt that the government may issue.

According to Tommy Honan, head of market research at the cryptocurrency exchange Swyftx, it is likely that the mere relief of a debt agreement may draw traders back to the table and lead to the next significant leg-up in the price of Bitcoin.

Both the overall national debt and the debt cap were $31.4 trillion as of January 2023. Since 2001, the U.S. government has spent an average of over $1 trillion more per year than it has taken in via taxes and other sources of income. It must borrow money to continue financing the payments that Congress has already approved in order to bridge the gap.

Joe Biden not in Favor of Crypto

U.S. President Joe Biden addressed continuing debt default discussions during his speech on the last day of the G7 conference in Japan, saying he would not accept a deal that benefits tax evaders and cryptocurrency traders.

“I won’t agree to a compromise that safeguards wealthy cryptocurrency traders and tax evaders while putting the lives of almost a million Americans who receive food assistance in danger.”

The President claims that the bipartisan debt limit deal with Republican leaders will help crypto traders among other people, and the remarks are made in opposition to it.

The political polarization in America prevents the two parties from reaching a compromise during discussions about the federal budget and debt limit. In the absence of a new budget agreement, the United States may run out of money as early as next month as the national debt soars to nearly $32 trillion.

In an effort to tighten tax loopholes, President Biden took a shot at “wealthy crypto investors” earlier this month.

In the general election that will take place in November 2024, Americans and the cryptocurrency sector are still optimistic that a President and government that is more supportive of the sector will be chosen.