Bitcoin May Benefit From U.S. Debt Ceiling Concerns, Analysts Say

by James · April 23, 2023

By Frances Yue

Uncertainty over whether the US will raise the debt ceiling before it is hit in the coming months has begun to rattle some financial markets as it did in 2011, but it could make a bullish case for bitcoin, according to analysts at crypto investment firm NYDIG.

The deadline to raise the US debt ceiling, or how much money the US government is allowed to borrow, is approaching faster than expected, according to analysts at Goldman Sachs. It could come as early as June, according to the analysts.

Concerns over the looming deadline are rippling through the T-bill market, sending the yield on the 1-month T-bill on Friday to its lowest close since October.

Read: BofA changes debt ceiling deadline estimate as financial markets reflect concerns over US borrowing limit

Also read: Here’s how anxiety about the US debt ceiling could play out in the markets

However, bitcoin may find its opportunity to shine amid such uncertainty, analysts at NYDIG wrote in a Friday note.

Bitcoin can be seen as “a valid investment option for those who want to insulate themselves from the machinery of politicians and monetary policy setters,” according to the NYDIG analysts.

Supporters of the crypto have long touted it as a non-sovereign store of value and a hedge against the existing monetary systems.

To be sure, the crypto price remains highly volatile, and the digital asset market remains largely unregulated.

Bitcoin is trading at around $27,360 on Friday, down about 3% over the past 24 hours, according to CoinDesk data, but is up nearly 70% so far this year, but is still down 60% from a record high in November 2021.

In 2011, the last time the U.S. experienced a debt ceiling crisis, the CBOE Volatility Index, commonly known as Wall Street’s “fear gauge,” rose to nearly 50 from around 20, and the S&P 500 plunged 12% to 1,100.

At the time, bitcoin, which was created in 2009, was still “in its infancy,” the NYDIG analysts noted, but now with a market cap of more than $550 billion, bitcoin may see a different story, the analysts said.

– Frances Yue

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04-23-23 2130ET