The debt ceiling is unlikely to be raised as the government faces growing pressure from interest payments, which might serve as a boost for Bitcoin and other cryptocurrencies.
Bitcoin experienced a surge, breaking the $27,000 barrier for the first time this month. As per Coin Metrics, Bitcoin was trading at $26,685.97, marking an increase of nearly 4% to reach $27,403.17 earlier in the day.
The exact catalyst behind this move remains uncertain, but it coincided with heightened trading activity during the Asian market's opening hours.
Dessislava Aubert, a senior research analyst at crypto data provider Kaiko, noted that in the current low liquidity environment, even modest buying and selling pressures could lead to significant spot price movements and potentially trigger liquidations in derivative markets.
The U.S. Federal Reserve disclosed a notable announcement on September 14, unveiling accumulated losses of $100 billion in 2023. This financial setback arises from interest payments on the Fed’s debt surpassing earnings generated from its holdings and services provided to the financial sector.
However, the shift from traditional assets to Bitcoin has been observed on the day as major exchanges recorded large Bitcoin inflows.
Some analysts speculate that these losses, which began a year ago, could potentially double by 2024. The central bank categorizes these negative results as “deferred assets” and asserts that there’s no immediate necessity to cover them.
Historically, the Federal Reserve has been a profitable institution. However, the absence of profits does not hinder the central bank’s ability to conduct monetary policy and achieve its objectives. This gave Bitcoin and the digital currency market an upper hand for investors to diversify their portfolios.
The Fed's balance sheet has incurred losses, primarily due to substantial interest rate hikes from near-zero in March 2022 to the current 5.25%. Even if interest rates remain unchanged, the Fed’s losses are expected to persist for some time due to the expansionary measures implemented in 2020 and 2021.
The U.S. Federal Reserve's financial situation prompts a reevaluation of investment strategies. Fixed-income returns may not outpace inflation for an extended period, given the government's potential issuance of additional Treasurys.
Real estate and stocks, traditionally considered reliable stores of value, face uncertainties as the market grapples with rising interest rates and inflationary pressures.
As per CoinStats, Bitcoin is currently trading at $26,766.04, up 0.33% in the previous 24 hours, with a live market cap of $522B. It has a circulating supply volume of 21,000,000 BTC coins and a maximum supply volume of 21,000,000, with a 24-hour trading volume of $28 billion.
Since Sept. 14, Bitcoin has remained above the 20-day EMA ($26,394), indicating that the bulls have turned the level into support. Buyers are attempting to strengthen their position by pushing the price above the 50-day simple moving average ($27,255).
The bears are predicted to put up a hard fight between the 50-day SMA and the overhead barrier at $28,143. If the price falls sharply from this level, the BTC may remain range-bound between $24,800 and $28,143 for a few days. Additionally, the RSI is at 53 which marks a bullish push above 40 RSI.
If bulls push the price above $28,143, it will open the way for $30,000 and $31,000 as the following targets.
In conclusion, amidst these financial shifts, Bitcoin and other cryptocurrencies emerge as potential hedges. The limitless nature of the U.S. government’s debt ceiling highlights the importance of considering assets like Bitcoin, irrespective of short-term price trends.
As investors navigate this evolving landscape, the cryptocurrency market may present itself as an increasingly viable option for those seeking a secure harbour for their cash reserves.