The U.S. Treasury will hit its $36 trillion debt limit after President Trump’s inauguration. This will necessitate a two-month debt issuance suspension according to Treasury Secretary, Janet Yellen. This suspension could affect global liquidity, Bitcoin and other global markets.
On January 17, the U.S. Treasury Secretary, Janet Yellen, wrote to congressional leadership reminding them of the debt ceiling. The official letter notified Congress that the extended limit on the debt ceiling effected on January 2, will be reached between January 14 and January 23.
The letter also stated that starting on January 21, the Treasury will begin to take extraordinary measures to curb the situation. This will include a two month debt issuance suspension that will begin January 21 and last through March 14.
According to crypto investor and analyst, Raoul Paul, Bitcoin may experience a local top at $110,000 at the end of January before major corrections send it below $70,000 in February.
This necessitated move by the Treasury to protect the full faith and credit of the United States could override market sentiments and behavior.
Bitcoin’s Reaction Based on Market Reaction
Some analysts argue that the suspension in debt issuance might not have a significant impact Bitcoin’s price.
Marcin Kazmierczak, co-founder and chief operating officer of Redstone, says that the traditional market will be tightened. However, Bitcoin’s impact will depend on institutional behaviour.
In his interview with Cointelegraph, Kazmierczak says, “During previous debt ceiling standoffs, Bitcoin has shown mixed correlations with traditional market liquidity metrics. The key factors to watch will be institutional behavior and broader market’s reaction.”
Alvin Kan, COO of Bitget Wallet, added that “One of the broader market’s reaction might be risk-off environments which can potentially impact Bitcoin negatively. The outcome would depend on investor behavior, economic policy responses, and global financial sentiment.”
However, according to Jamie Coutts, global liquidity would rise after the suspension is over, making way for Bitcoin to continue its uptrend.
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