US Debt Ceiling Rattles Markets As Crypto Community Discusses Political 'Theater'
Prices of bitcoin (BTC) and other cryptoassets could come under pressure again as the political rivalry in Washington, D.C. threatens to shut down the US federal government - unless an agreement is reached to raise the so-called debt ceiling. But judging from crypto community's reaction, there is little reason to panic, with the political spectacle being described as “a theater.”
Speaking to the members of the Senate Banking Committee, US Treasury Secretary Janet Yellen warned on Tuesday that the US federal government could run out of money by October 18 unless Congress acts quickly to raise the debt ceiling.
“It would be disastrous for the American economy, for global financial markets, and for millions of families and workers,” Yellen told the senators about the consequences of not acting.
She also warned that even flirting with a default – meaning the US government failing to meet payment obligations to creditors – could rattle global financial markets.
The debt ceiling is the US government’s self-imposed limit on how much money it can borrow. The limit was first introduced in 1917, and has been raised a number of times since then. As time has passed, however, the debt ceiling has become a traditional political issue.
The current worries surrounding the debt ceiling and the potential for a government shutdown, and even the chance – although very small – for a default, have already impacted sentiment in both stocks and crypto.
On Tuesday, stocks ended the day sharply lower on Wall Street, with the S&P 500 index seeing its biggest one-day percentage fall since May.
Similarly, major cryptoassets like bitcoin and ethereum (ETH) were also down, although less markedly than the stock market.
The number one cryptocurrency appears to have found support around the USD 40,800 level, from which it bounced on Wednesday on somewhat improved market sentiment.
The debt ceiling fears this week follow concerns about the potential for central bank rate hikes and tapering seen late last week, as well as concerns related to a possible collapse of Chinese property development giant Evergrande seen shortly before that.
Discussing the latest issue that keep investors up at night on Reddit’s r/CryptoCurrency subreddit, however, many members of the crypto community seemed to agree with the position that the debt ceiling debate is mainly a form of “political theater” designed for politicians to “keep pretending they are useful.”
“It’s a political farce, congress draws up a budget that the president [has] to execute. The president then asks for money and when the [tax base] isn’t enough congress acts shocked that the president recklessly needs more money. Same story every time,” one user responded by saying.
“They'll just shut down the parks and etc. People will go oh no. They'll reach a compromise that really just kicks it down the road. Both parties will blame the other whilst saying they weren't weak because they only compromised for the good of the people. It's happened a few times now,” another user commented.
And while the debt ceiling is one dark cloud on the horizon, it is not the only one to keep an eye on.
According to Charlie Silver, CEO of the crypto-focused online advertising firm Permission.io, October has historically been “the most dangerous month of the year” for the stock market, which also could have implications for crypto markets.
“Crypto is vacillating between resistance and support,” Silver said, adding that the market is “waiting for regulatory clarity in the US and central bank moves around the Chinese debt crisis.”
Still, however, the CEO noted that “signs are positive” for crypto, “considering the dramatic amount of new participants” that are entering the space.
At 10:30 UTC, BTC was up 1.2% over the past 24 hours to a price of USD 42,375. Ethereum, meanwhile, was unchanged over the same time period, trading at USD 2,925. BTC remains up nearly 5% for the past 7 days, while ETH was up by almost 7% at the same time.
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