Bitcoin and the Debt Ceiling Debate

The biggest economic risk THIS MONTH is the “debt ceiling debate” in the US; the discussion is basically centered around whether the US should extend the ceiling on its credit limit and keep printing money that it doesn’t have by selling debt. The debt limit, a legal ceiling established by Congress, restricts the total debt that the US government can accumulate. Upon reaching this limit, the government faces two options: either raise the limit or curtail spending. Presently, this standoff is what is playing out in the US political arena.

How will this affect Bitcoin and Crypto in general? 

The situation could significantly sway Bitcoin’s value over the next few weeks:

Negative Impact on the US Economy: If the government fails to increase the debt limit, it may lead to a government shutdown, potentially hurting the US economy. The resultant decrease in the US dollar value might then boost Bitcoin’s value.

Positive Impact on the US Economy: Conversely, should the government succeed in raising the debt limit, this could strengthen the US dollar, potentially decreasing Bitcoin’s value.

Those are the potential short-term effects that might last a week, however it’s important to look at the longer-term picture. 

If the US raises the debt ceiling limit, that means that more dollars will continue to be printed. (until the US hits the limit AGAIN in the near future) Over time, this will have the effect of debasing the dollar’s value, as we’ve seen for years. 

In the end, the merits of Bitcoin will be judged on their own in the free market, and if nothing else, then the mid-March collapse of several banks (and the resulting BTC run) shows that Bitcoin has now come of age as a true monetary hedge…just not the hedge against inflation that was predicted years ago.