Politicians in the US are likely to strike a deal and raise the government’s debt ceiling of $31.4 trillion for another two years. Amidst the controversy, bitcoin price is flat but lower, tracking below the psychological $30,000 level as the bulls are recovering after suffering sharp losses in the middle of this week.
Discuss the debt ceiling
There are reports that there will be more discretionary spending on the military and veterans while cutting back on other sectors.
Moreover, there are uncertain reports That the Biden administration will likely not fund the Internal Revenue Service (IRS) to boost collections, as previously stipulated.
Instead, the immediate focus will be on hiring more auditors and targeting wealthy citizens.
There are concerns that the Treasury Department and the US government will default on their commitments as soon as the first half of June 2023.
Although highly unlikely, since the Treasury Department said it would liquidate $119 billion in debt that day, the market is watching how the discussions play out.
Bitcoin is regaining ground after its losses on May 24th.
With a deal done and a consensus reached, politicians will raise the debt ceiling again, sending mixed signals to the economy.
Unlike in previous years when cryptocurrencies were decoupled from the mainstream economy, things have changed with bitcoin becoming more and more popular.
Will Bitcoin benefit?
Bitcoin prices are likely to rise if there is a default caused by politicians who disagree about the way forward.
On the flip side, a deal that addresses concerns raised by the negotiating parties could indicate confidence in the economy despite more debt on the table.
This averts a crisis and keeps operations running, removing uncertainty and stabilizing the economy.
In this case, the US dollar could strengthen, possibly reversing the gains of the Bitcoin bulls in the last two trading days.
However, the cryptocurrency community remains bullish on Bitcoin given the macroeconomic events and the next year’s halving.
After months of continuous interest rate increases, the US Federal Reserve could slow rate increases at its next meeting in mid-June. Their work can support the commodity and stock markets.
At the same time, the expected supply shock following the Bitcoin miner reward halving could make BTC scarcer, driving up the price.
Miners are special nodes whose job is to confirm transactions and decentralize the network.
If the past price action can be used to predict future formations, then the outlook for BTC looks positive. Before rallying from 2020 to 2021, Bitcoin price bottomed out in 2018 and surged in 2019 ahead of the 2020 halving event.
The same pattern may repeat until 2024 when the Bitcoin halving will occur.
Featured image from Canva, chart from TradingView
