Bitcoin rallies 4% on US debt limit suspension deal

Crypto markets are in the green during the Asian trading session on Monday morning. The momentum has been fueled by the debt ceiling deal between US President Joe Biden and top congressional Republican Kevin McCarthy.

However, a tentative agreement to suspend the federal government’s $31.4 trillion debt limit has yet to be approved by Congress. Nevertheless, it has increased risk-taking ability in global markets, According to Bloomberg.

bitcoin back in the green

“The positive risk sentiment this morning is directly related to the resolution of the debt-limit impasse,” said John Toro, head of trading at crypto exchange Independent Reserve, before adding:

“Front-end funding costs remain extremely high relative to crypto returns, resulting in negative ramifications for long holders. This will continue to prove a headwind for risk assets and crypto complex.

BTC reached around $28,500 a few hours ago, which is the highest level since May 8. It has since retraced slightly, but is still above $28,000 after gaining 4% on the day.

However, the longer term view still paints a picture of consolidation for BTC.

The debt ceiling is a legislative limit on the national debt that the Treasury can spend. This is the maximum limit on how much the federal government can pay by borrowing more money on the debt it has already borrowed.

The debt limit currently stands at $31.4 trillion, and Treasury Secretary Janet Yellen warned that unless a deal could be reached, default was highly likely. The deal will suspend this debt limit until January 2025, meaning there is no limit on how much more the government can borrow.

It appears that the credit line is not being raised—it is being “suspended”.
Therefore, there will be no limit on how much more debt the US can borrow over the next 2 years.
There is no explanation given as to how a new credit limit will come into existence in 2 years.$BTC Rallying on the news.

— MetalLawMan (@MetaLawMan) May 28, 2023

“It is possible that the sheer relief of the debt deal will bring traders back to the table and trigger the next big leg-up in bitcoin price,” commented Tommy Honan, head of market analysis at crypto exchange Swyftx.

crypto market rally

The total market capitalization rose by 3% on the day to reach $1.22 trillion. The $37 billion capital inflow has boosted all crypto assets, and the move has injected some volatility into a market that has been stable in recent weeks.

Ethereum was up 3.4% to top $1,900 for the first time since May 8. All the rest of the altcoins were in the green at the time of writing, but their gains were not as big as bitcoin, which was the market leader this Monday. ,