Bitcoin Surges 4% after US Debt Limit Suspension Deal

Bitcoin (BTC) saw a significant surge, hitting a three-week high after it was announced that an agreement had been reached on the US government’s debt ceiling. This positive development has contributed to bullish sentiment in the crypto markets during Monday morning’s Asian trading session. 

The deal between US President Joe Biden and top Republican Congressman Kevin McCarthy aimed at suspending the federal government’s $31.4 trillion debt ceiling has boosted risk appetite around the world, according to Bloomberg.

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The price of Bitcoin surged after the announcement

While the tentative agreement has yet to be approved by Congress, its announcement has already had a positive impact. John Toro, head of trading at the crypto exchange Independent Reserve, emphasized the direct link between the resolution of the debt ceiling impasse and the current positive risk sentiment. However, Toro also mentioned that the increased pre-funding costs versus crypto returns pose a challenge for long holders and could act as a headwind for risky assets and the crypto complex.

BTC recently surged to nearly $28,500, its highest level since May 8, although it has declined slightly and is currently trading above $28,000 after climbing 4% on the day. Despite the near-term recovery, the longer-term perspective suggests that BTC is still in a sideways consolidation.

The debt ceiling refers to a legal limit on government debt that the Treasury Department can take on

It sets a ceiling on the amount of money the federal government can borrow to meet its financial obligations. The amount currently stands at $31.4 trillion. Treasury Secretary Janet Yellen has warned of a possible default if no agreement is reached. The deal aims to suspend the debt ceiling until January 2025, effectively removing all restrictions on the government’s ability to accumulate additional debt.

Tommy Honan, head of market analysis at crypto exchange Swyftx, believes the debt deal relief could bring traders back into the market and trigger a significant price spike for Bitcoin.

The positive sentiment also had broader implications for the crypto market, with the total market cap rising by 3% to $1.22 trillion. This $37 billion capital inflow has boosted all crypto assets and provided some much-needed volatility in a market that has been relatively flat for the past few weeks.

Ethereum (ETH) posted a 3.4% gain on the day, surpassing the $1,900 mark for the first time since May 8th. Other altcoins were also in the green at the time of writing, but their gains were not as strong as Bitcoin’s, which continues to lead the market this Monday.

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(Featured image by Kanchanara via Unsplash)

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