The convergence of politics and finance often has a profound impact on the financial markets, including the cryptocurrency market. The upcoming vote in the United States Congress to raise the debt ceiling has triggered notable fluctuations in the prices of Bitcoin and Ethereum, signifying potential consequences for the crypto industry.
Anticipation Builds in Crypto Market Ahead of Debt Ceiling Vote
On a recent Wednesday, the crypto market, particularly Bitcoin and Ethereum, experienced a downturn as market participants reacted to the imminent vote on increasing the US debt ceiling. The Federal Reserve’s potential decision to raise interest rates, driven by robust labor market data, also contributed to the market fluctuations.
The proposed legislation to raise the US debt ceiling, coupled with new federal spending cuts, made progress in the House of Representatives on Tuesday. The bill is scheduled for deliberation and subsequent voting later on Wednesday. If approved by the House, it will then move to the Senate, with discussions potentially extending into the weekend as the June 5 deadline looms.
Joe Saluzzi, co-manager of trading at Themis Trading, acknowledged the likelihood of the agreement ultimately passing but noted that uncertainties persist until the finalization of the agreement. Some Congress members have expressed opposition, adding to the air of uncertainty surrounding the outcome.
April’s job vacancy data in the United States unexpectedly showed an increase, indicating the continued strength of the labor market. This could potentially prompt the Federal Reserve to implement an interest rate hike in June. Economist Mohamed El-Erian commented on the Federal Reserve’s decision-making dilemma, suggesting that they must choose between hitting the brakes too hard, risking a recession, or adopting a stop-go pattern, risking inflation persisting into 2023.
Market projections currently place the probability of a 25-basis point hike at the Federal Reserve’s June 13-14 meeting at around 71%. Investors are eagerly awaiting the release of the Labor Department’s highly anticipated job report for May, scheduled for Friday. This report could provide valuable insights into the resilience of the US economy in the face of high interest rates and inflation.
Bitcoin and Ethereum React to Debt Limit Bill
The ongoing debate surrounding the debt ceiling has cast a shadow over the crypto market. Previously, indications of progress had propelled Bitcoin to a 5.26% increase, reaching a high of $28,500 on Sunday, while Ethereum had risen by 5.53% to $1,930 in May.
However, on Wednesday, the crypto market sentiment shifted as optimism surrounding the debt ceiling rally waned. Bitcoin, the leading cryptocurrency, experienced a 3% decline and was trading at $26,830. Simultaneously, Ethereum also faced a downturn, dropping by 2.89% to $1,845.
These developments suggest that both cryptocurrencies are heading towards their first losing streak in 2023. Bitcoin is on track for an 8% decline, marking its worst month since November 2022. Ethereum has experienced a 2.5% decline for the month, potentially making May its poorest-performing month since December 2022.
