Crypto Week: Debt Troubles are No Match for Bitcoin

Financial markets are seen to be stoned as the debt ceiling drama continues to hit the stage. Even though such debt troubles regularly emerge and are always resolved in the end without any serious shocks felt, this issue is still miraculously causing investors to worry. Republicans and Democrats must come to a compromise to get the bill to Congress during the week between June 1-8. Indeed, sometimes the deadline is missed, like in 2011, but even then the market did not collapse.

This drama led the prices of stocks and cryptos to a flatten as volatility decreased. Meanwhile, investors are trying to guess how the market will move after the debt ceiling issues are lifted from the agenda. Federal Reserve’s (Fed) officials are signaling to the hike of interest rates. Sent-Louis Fed President, James Bullard, suggested that interest rates should be hiked by 50 basis points. Uncertainties always make speculations stronger. So, we may expect any surprises in the market, including panic.

So, it will be better for an investor to wait and see during this troubled period. This is particularly true for risky instruments like stocks and cryptos. U.S. Treasuries yields are rising as investors see a successful resolution of debt ceiling issues, low recession chances, and rising interest rates. This sentiment in not favoring risky asset investments. Risk appetite is muted, and this sentiment is unlikely to change soon.

BTC prices are running flat after hitting highs at $31,000 per coin. We forecast prices are likely to go down towards $24,000 per coin, with a chance to dive further down to $19,500. The major cryptocurrency has simply no fundamentals to go up, while it has a lot of reasons to move down to follow the weakness of the stock market.