Bitcoin Rises Above $27,000: Debt Ceiling Talks to Determine Safe-Haven Status

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Bitcoin (BTC) has started the U.S. trading week on a positive note, climbing above $27,000 after dropping to as low as $25,800 on late Friday. The largest cryptocurrency by market capitalization was recently trading at around $27,350, marking an increase of approximately 1.6% in just 24 hours. Following a dip below $26,000, bitcoin hovered under the $27,000 mark until late Sunday.

Edward Moya, a senior market analyst at foreign exchange market maker Oanda, suggested in a Monday note that the upcoming debt ceiling talks could provide insight into whether investors view bitcoin as a safe-haven asset despite ongoing regulatory uncertainty. He also mentioned the possibility of selling pressure pushing prices below last week’s low if risk aversion triggers a de-risking moment.

Meanwhile, Ether (ETH), the second-largest cryptocurrency by market capitalization, hovered around $1,830 after a 1% rise on Monday afternoon. Other digital assets, such as LDO – the governance token for the liquid staking platform Lido, and The Graph’s GRT token, also experienced gains of 11% and 12%, respectively.

The CoinDesk Market Index (CMI), which measures overall crypto market performance, was up nearly 1.8% for the day.

However, concerns about low liquidity in the crypto markets persist. Market makers Jane Street and Jump Crypto withdrew from crypto trading in the U.S. last week due to regulatory uncertainty. A report by crypto data firm Kaiko on Monday indicated that BTC’s 1% market depth (a gauge that measures liquidity conditions) dropped 4% over the past month, while ETH’s declined 2%. Altcoin liquidity suffered even more, dropping around 17% on a monthly basis.

Sheraz Ahmed, managing partner at blockchain consultancy Storm Partners, attributed the change to a lack of excess liquidity from institutional and professional investors, who would typically invest in the crypto market.

Equity markets, such as the S&P 500 and the tech-heavy Nasdaq, experienced gains on Monday. Market participants will be closely monitoring several economic readings this week for hints of a potential slowdown, including U.S. monthly retail sales and housing data.

Greg Cipolaro, Global Head of Research at bitcoin-focused investment firm NYDIG, noted that yield curve inversions similar to the current one have often signaled an impending recession within the next 12 months. He added that although recessions are an inevitability, asset prices and market response will likely be determined by fiscal and monetary policies.

Despite the potential risks, Cipolaro remains optimistic, stating that financial markets have already undergone a significant correction, which could mitigate the impact of an upcoming recession.

Source: Coindesk

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