The U.S. debt ceiling has been a cause of worry for many investors and financial institutions. The nation reached its statutory debt limit of $31.4 trillion in January 2023. Treasury Secretary Janet Yellen has said that the Government might be unable to pay its obligations from June 1. On Tuesday night, the agreement passed a crucial test and was approved to move to the House floor on a 7-6 vote. On Wednesday, the floor vote will start at about 8:30 p.m. ET. However, many are worried about how the U.S. debt ceiling would affect the crypto markets.
Big day today as the voting for the Debt Ceiling will be taking place.— Michaël van de Poppe (@CryptoMichNL) May 31, 2023
Markets are definitely going to move on that.
no deal = risk-off.
deal = risk-on and markets are continuing their upwards momentum.
Additionally, House Republicans proposed raising the debt limit to $1.5 trillion or extending it till March 31, 2023. But U.S. President Joe Biden and House Speaker Kevin McCarthy decided to suspend the debt ceiling until Jan. 1, 2025.
How will the U.S. debt ceiling vote affect the crypto market?
If the debt ceiling deal is passed, it may raise sentiment among investors. The dip in the crypto market is most likely because of the uncertainty around the U.S. debt ceiling vote.
Furthermore, on Sunday, Bitcoin (BTC) surpassed $28,000 for the first time in nearly three weeks. This is credited to the debt ceiling suspension till 2025. However, the vote on how things will move forward has caused a bit of worry among investors. The outcome might raise some volatility in the markets. If things move smoothly, we may see an increase in fund inflow to risky assets. However, if things do not go as smoothly as anticipated, it could mean a heavy price correction.
In the meantime, traders have altered their forecasts for the U.S. Federal Reserve to take a more dovish stance on monetary policy. The likelihood that the Fed will increase interest rates by 25 basis points for a fourth straight meeting in June is currently pegged at 66%, according to the CME FedWatch Tool. A week ago, only 28% anticipated a rate increase.