Crypto markets are in the green during the Monday morning Asian trading session. The momentum has been driven by a debt ceiling deal between U.S. President Joe Biden and top congressional Republican Kevin McCarthy.
However, the tentative agreement to suspend the federal government’s $31.4 trillion debt ceiling has yet to clear Congress. Nevertheless, it has buoyed risk appetite in global markets, according to Bloomberg.
Bitcoin Back in The Green
John Toro, head of trading at crypto exchange Independent Reserve said, “This morning’s positive risk sentiment directly relates to the resolution of the debt-ceiling impasse,” before adding:
“Front-end funding costs remain highly elevated relative to crypto returns, resulting in negative carry for long holders. This will continue to prove a headwind for risk assets and the crypto complex.”
BTC rallied to almost $28,500 a few hours ago, its highest level since May 8. It has since retreated slightly but still stands above $28,000 following a gain of 4% on the day.
However, the longer-term view still paints a picture of sideways consolidation for BTC.
The debt limit is a legislative limit on the national debt the Treasury can incur. It is a ceiling on how much money the federal government can pay by borrowing more money on the debt it already borrowed.
The debt limit is currently $31.4 trillion, and Treasury Secretary Janet Yellen warned that a default was highly likely unless a deal could be struck. The deal would suspend this debt limit through January 2025, which means that there is now no limit on how much more debt the government can incur.
It appears that the Debt Limit is not being increased—it is being “suspended.”
So, there will be No Limit on how much more debt the U.S. can incur over the next 2 yrs.
No explanation given on how a new Debt Limit will spring into existence in 2 yrs.$BTC is rallying on the news.
— MetaLawMan (@MetaLawMan) May 28, 2023
Tommy Honan, head of market analysis at crypto exchange Swyftx, commented, “It is possible the sheer relief of a debt deal will bring traders back to the table and trigger the next big leg-up in the price of Bitcoin.”
Crypto Market Rally
Total market capitalization is up 3% on the day to reach $1.22 trillion. The $37 billion capital inflow has boosted all crypto assets, and the move has injected some volatility in what has been a stagnant market in recent weeks.
Ethereum had gained 3.4% on the day to top $1,900 for the first time since May 8. The rest of the altcoins were in the green at the time of writing, but their gains were not as big as Bitcoin’s, which was leading markets this Monday.