Politicians in the United States are likely to strike a deal and raise the government’s debt ceiling to $31.4 trillion for two more years. Amid this debate, Bitcoin price is firm but lower, below the psychological $30,000 level as bulls rally after posting heavy losses in the middle of this week.
Debt ceiling debate
There are reports that there will be more discretionary spending in the military and veterans with the reduction in other sectors.
Also, they are not confirmed. reports that the Biden administration will likely not fund the IRS to boost collection, as explained above.
Instead, the immediate focus will be on hiring more auditors and targeting wealthy citizens.
There are concerns that the Treasury Department and the United States government will default on their obligation as early as the first half of June 2023.
Although highly unlikely, as the Treasury Department has said it will pay off $119 billion of debt that day, the market is watching how the discussions play out.
Bitcoin is firming up after the May 24 losses.
Bitcoin price on May 26 | Source: BTCUSDT on Binance, TradingView
As a deal is struck and a consensus is reached, politicians will raise the debt ceiling again, sending mixed signals to the economy.
Unlike in years past, when major cryptocurrencies decoupled from the mainstream economy, things have changed as Bitcoin’s prominence rises.
Will Bitcoin benefit?
BTC prices are likely to rally if there is a default triggered by politicians who disagree on the way forward.
Conversely, a deal that addresses the concerns raised by the negotiating parties could signal confidence in the economy even though more debt is on the table.
This prevents a crisis and keeps operations running, removing uncertainty and stabilizing the economy.
In that case, the USD could strengthen, possibly reversing the gains of Bitcoin bulls over the past two trading days.
Still, the crypto community remains bullish on Bitcoin considering macroeconomic events and the halving next year.
After months of steady interest rate hikes, the US Federal Reserve could halt rate hikes at its next meeting in mid-June. Its action could support the commodity and stock markets.
At the same time, the expected supply shock from the halving of Bitcoin miners’ rewards could make BTC more scarce, driving prices even higher.
Miners are special nodes in charge of confirming transactions and decentralizing the network.
If the previous price action can be used to predict future formations, the outlook for BTC looks positive. Prior to the 2020 to 2021 rally, BTC prices bottomed out in 2018 and rose in 2019 before the 2020 halving event.
The same pattern may be repeated until 2024 when the Bitcoin halving occurs.
Featured Image from Canva, Chart from TradingView
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