Bitcoin Correction Looms as US Debt Ceiling Crisis Halts Treasury Issuance

The US debt ceiling, now set at $36 trillion, puts the Treasury in a budgetary impasse. To address this, Janet Yellen, Secretary of the Treasury, announced a suspension of debt issuance starting January 21.

The US debt has surpassed a historic threshold, reaching $36 trillion and prompting the Treasury to temporarily halt debt issuance. This measure, taken to avert a crisis, has sparked concerns in the financial markets. Among the assets likely to be affected is bitcoin, which, despite being frequently viewed as a safe haven against economic uncertainties, could experience a notable correction. However, this situation extends beyond mere market fluctuations, reflecting the fragilities of a global economic system seeking balance, where institutional responses will be critical for the future of cryptos.

The immediate impact of the debt ceiling on bitcoin

The US debt ceiling, currently set at $36 trillion, has placed the Treasury in a difficult budgetary position. To address this, Janet Yellen, Secretary of the Treasury, announced a suspension of debt issuance starting January 21. This measure, which will extend until March 14, risks significantly reducing global liquidity. Such a contraction, often associated with an increase in volatility, could affect financial assets, including bitcoin.

Raoul Pal, founder of Global Macro Investor, anticipates that this liquidity drop will coincide with a temporary peak for bitcoin at $110,000 in January. Subsequently, the asset could undergo a correction and fall below $70,000. Indeed, “global liquidity cycles dictate bitcoin’s behavior, and we anticipate short-term tensions,” he declared in an analysis published on X (formerly Twitter) on November 29, 2024.

These concerns are amplified by signals emanating from traditional financial markets. The GMI global liquidity index, regarded as a benchmark indicator, points to imminent bearish pressure. Although bitcoin is often perceived as a safe haven against economic uncertainties, it remains vulnerable to fluctuations in global liquidity. This demonstrates that, despite its independence from traditional financial institutions, its evolution is still deeply linked to global macroeconomic dynamics.

Divergences in analysis and long-term perspectives

While some experts fear a period of turbulence for bitcoin, others see this crisis as an opportunity to strengthen its role as a hedge against monetary instability. Marcin Kazmierczak, co-founder of Redstone, emphasized that “during previous liquidity crises, bitcoin showed varied correlations with traditional markets.” According to him, the attitude of institutional investors will play a crucial role in the asset’s evolution. In other words, these decisions could either limit volatility or exacerbate market movements.

Despite short-term uncertainties, the long-term outlook for bitcoin remains decidedly optimistic. Jamie Coutts, an analyst at Real Vision, estimated in an analysis published on X on November 27, 2024, that the recovery of global money supply growth after March could propel the price of bitcoin beyond $132,000 by the end of 2025. This projection is based on the assumption of a global increase in liquidity, which strengthens interest in cryptos as a store of value.

Even bolder forecasts come from asset management firm VanEck, which anticipates a price of $180,000 after a 30 % correction in the first quarter of 2025. These estimates, while ambitious, reflect growing investor confidence in the large-scale adoption of bitcoin as a store of value. Such analyses also indicate an expectation of a more mature market, capable of overcoming current challenges and thriving in a changing global economic context.

This period of financial uncertainty raises questions about the place of bitcoin in a context marked by increasing economic tensions and complex political adjustments. In the short term, volatility seems inevitable, particularly in light of fluctuations in global liquidity. However, optimistic projections suggest considerable potential for bitcoin, both as a store of value and as a tool for global adoption. In a rapidly changing economic world, bitcoin may well establish itself further as a central player in the new financial dynamics.

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A graduate of Sciences Po Toulouse and holder of a blockchain consultant certification from Alyra, I joined the Cointribune adventure in 2019. Convinced of blockchain’s potential to revolutionize multiple sectors of the economy, I’m committed to educating and informing the general public about this constantly evolving ecosystem. My goal is to empower everyone to better understand blockchain and grasp the opportunities it presents. I strive each day to provide an objective analysis of current events, decode market trends, relay the latest technological innovations and put into perspective the economic and societal stakes of this unfolding revolution.