As the US debt default deadline approaches, cryptocurrencies like Bitcoin and Ethereum may experience massive selloffs next week, predicts Blockchain.com CEO Peter Smith during the Qatar Economic Forum. Stocks and crypto prices may also decline following a potential debt ceiling deal as the US Treasury Department anticipates issuing $700 billion in Treasury bills to compensate for lost funds this quarter.
The critical aspect here is the impact of the US debt situation on the crypto market. According to Smith, a default or recession will hit cryptocurrencies initially, but they are expected to bounce back soon after. He emphasizes that, “On a long horizon, these are probably good for crypto…If the U.S. government defaults, we’ll probably see a quick pull-back and then a very strong push upward in the crypto market.”
Smith also believes that the crypto market will recover gradually this year, with 2024 being a watershed moment for cryptocurrency as Bitcoin goes through a halving in April. Additionally, Blockchain.com is considering expanding its small Middle Eastern office in Dubai, United Arab Emirates, due to the region’s progressive virtual asset regulations and crypto adoption.
However, if the debt ceiling deal between President Joe Biden and Republicans fails, Smith cautions it could be “catastrophic” for the global market. Alternatively, reaching a deal could pull liquidity out of financial markets. In the meantime, the US Federal Reserve is expected to pivot this year, with officials calling for two more hikes in response to persistently high inflation and a tight job market.
The ongoing political partisanship regarding the debt ceiling talks has led to Bitcoin investors panicking, resulting in the cryptocurrency’s price briefly dipping below $26,000. In the last 24 hours, Bitcoin has lost 2% of its value and is now trading at $26,400. Ethereum, the second-largest cryptocurrency, is trading above $1,800 after hitting an intraday low of $1,763.
Crypto analyst Rekt Capital warns that if Bitcoin loses the $26,200 support level, the price could drop into the lower $20,000 range, which coincides with the 200-week moving average. As the US debt situation unfolds, both proponents and skeptics of cryptocurrencies should pay close attention to market trends and the potential impact on their investments.
Source: Coingape
