The cryptocurrency market has recently experienced a boost, with Bitcoin and Ethereum continuing to climb alongside the stock market. This upward trend comes as U.S. lawmakers reach a tentative solution for the federal government’s $31.4 trillion debt ceiling, alleviating default concerns and promoting risk-on sentiments.
Bitcoin reached $28,000 on Monday morning, while Ethereum broke above $1,900. At the time of publication, Bitcoin was just under $28,000, up 2.9% on the day, with Ethereum maintaining above $1,900, up 3.2% in the last 24 hours, according to CoinGecko.
Over the weekend, U.S. President Joe Biden and Republican House speaker Kevin McCarthy reached a tentative deal to address the long-standing impasse over the debt ceiling. The deal awaits congressional approval, and if passed, would prevent the U.S. government from defaulting on its debt. As part of the agreement, spending caps and government program cuts would be implemented in exchange for extending the suspension of the debt ceiling until January 2025.
Anticipation of a formal deal led the stock market to hold on to last week’s gains. The S&P 500 futures reached a nine-month high above the 4,220 level, and the tech-heavy Nasdaq-100 index futures opened with a positive gap above 14,400 points—a 14-month high—on Monday.
However, gold prices have dropped since last week, as lawmakers worked to alleviate default concerns in the American economy and strengthen the dollar’s value. Gold was last trading at $1,941 per ounce—down 2.45% from the monthly opening value.
The next significant market-moving event for the U.S. economy will be the Federal Reserve policy rate meeting on June 14-15. Currently, CME traders, as indicated by the CME FedWatch tool, place a 65% chance that the central bank will increase the benchmark rate once more, dispelling previous hopes that May’s 25-basis point rate hike would be the last one for this year.
Historically, rate hikes have put selling pressure on Bitcoin, as higher dollar yields make risk-on assets like Bitcoin and stocks less attractive. This upcoming meeting raises a crucial question: will the potential hike, against the current backdrop of temporary debt ceiling resolution and boosted stock markets, cause a negative impact on the cryptocurrency market, or will the optimism prevail, allowing digital currencies to continue their upward trajectory? The answer will depend on the outcome of the meeting and how the market reacts to the unfolding events.
Source: Decrypt
