Bitcoin (BTC) is facing potential losses heading into the third quarter of 2023 after US lawmakers are likely to reach an agreement on raising the debt ceiling.
A $1 trillion liquidity hole
Raising the debt ceiling means the US Treasury could issue new bonds to raise cash to meet its previous obligations.
As a result, the cash pile in the Treasury General Account could jump from $95 billion in May to $550 billion in June and $600 billion in the next three months, according to the latest department estimates.
Ari Bergmann, founder of risk management firm Penso Advisors, estimates that the Treasury will top $1 trillion by the end of the third quarter of 2023.
“What worries me the most is that when the debt limit problem is resolved, and I think it will, there will be a very, very deep and sudden liquidity drain.”Bergmann stated:
“This is not something very obvious, but it is something very real. And we’ve seen before that such a drop in liquidity really hurts risky markets like stocks and credit.”
In other words, the cash available to buy riskier assets like stocks, Bitcoin, and cryptocurrencies is likely to experience downward price pressure at some point after the debt ceiling is raised.
Bloomberg adds:
Estimated at more than $1 trillion by the end of the third quarter, the supply burst would rapidly drain liquidity from the banking sector, drive up short-term funding rates, and tighten the screws on the US economy just as it is on the brink of recession. . According to Bank of America Corp.’s estimate, it would have the same economic impact as a quarter-point interest rate increase.
Will the Bitcoin price stay within the range?
Such macroeconomic hurdles could prevent Bitcoin from reclaiming its yearly highs of more than $30,000 in the coming months, says independent market analyst Income Sharks.
“Most likely we will have between 20,000 and 30,000 and even have a peak season”the analyst noted, adding:
“No new money is coming in; everything is rotating […] Unless we get a new narrative or the actions to find a way to recover, the US election in 2024 seems more likely to be the next big catalyst.
Meanwhile, BTC technical price charts show the BTC/USD pair consolidating below its 50-day EMA (50-day EMA; the red wave), near $27,650.
If this important resistance zone is not broken decisively, the chances of a reversal will increase.
Traders should watch for a possible correction towards the 200 day EMA near $25,000, the next major support zone, especially if the Fed raises 25 basis points in June.
This article does not contain investment advice or recommendations. All investments and trades carry risks, so readers should do their own research when making a decision.
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