Cryptocurrencies to suffer as US bonds suck up dollar liquidity
A successful increase in the debt ceiling would see the Treasury looking to rebuild its cash balance by issuing government bonds, which could suck liquidity out of the system and give upward momentum to bond yields, as increased issuance tends to depress prices and raise yields.
However, Bitcoin ( BTC ) is known to move in the opposite direction to bond yields and while raising the debt ceiling may remove major economic uncertainty, in reality, assets such as Bitcoin that are not linked to the real economy and rely heavily on fiat currency liquidity may suffer. In addition, issuing more US government bonds would increase public spending, which would further delay the likelihood of an interest rate cut coming.
However, Bitcoin ( BTC ) is known to move in the opposite direction to bond yields and while raising the debt ceiling may remove major economic uncertainty, in reality, assets such as Bitcoin that are not linked to the real economy and rely heavily on fiat currency liquidity may suffer. In addition, issuing more US government bonds would increase public spending, which would further delay the likelihood of an interest rate cut coming.