The price action on Bitcoin may have been a bit dull in recent days, but that seems to have everything to do with the US debt ceiling. At the moment there is still no clarity and negotiations on raising the debt ceiling are in full swing in Congress.
In those negotiations, the Democrats in the form of President Joe Biden’s administration are, of course, diametrically opposed to the Republicans.
Minimal risk of bankruptcy
According to Edward Moya of Oanda there is a minimal chance of the United States going bankrupt, but if that were to happen it would be bad for the markets. Bitcoin is currently trading in the $26,500 to $30,000 range pending more news on this development.
Since the 1960s, however, the US government has raised the debt ceiling 78 times. In that respect, it seems unlikely that they will not press the same button this time and allow the government to go over the old debt ceiling.
You may also wonder what the debt ceiling is for if it has already been raised 78 times in the past 70 years. In that respect, it seems to be mainly a hoax, which causes uncertainty in the market and nobody is waiting for that.
Beginning of June
As it stands now, the US Treasury will be empty by early June if a deal is not reached soon. If there is an agreement, then the US government will not suddenly have money. Then they can borrow more to finance their debts.
In that respect, raising the debt ceiling is not a good development for the purchasing power of the US dollar, but perhaps it is for Bitcoin and other risk assets.
Of course, the absolute scarcity of Bitcoin makes the digital currency an attractive medium for investors to hide in. While gold still has an inflation rate of 1 to 2 percent per year, only a maximum of 21 million Bitcoin will come onto the market.
Gold has no maximum in that sense or at least no maximum that we know at the moment. Because there is of course a limited amount of gold in the earth’s crust, there is no arguing about that.