The US House of Representatives on Wednesday passed the bipartisan agreement addressing the US debt ceiling issue in what was a well-earned win for House Speaker McCarthy and a somewhat tricky compromise for US President Joe Biden and other Democrats. Though the bill passed overwhelmingly with a vote of 314 (165 Democrats joined 149 Republicans) against 117 (71 Republicans and 46 Democrats) in a late Wednesday sitting, it still attracted opposition from both sides. It now awaits approval in a Senate vote later this week before President Biden can complete the legislative process by formally signing the 99-page bill into law.
Bitcoin loses grip of $27K shortly after, XDC up double digits on the day
Crypto markets reacted to news of the bill passing the House, led by Bitcoin (BTC), which gave in to the immense selling pressure building above $27,000 and slipped toward $26,700. Bitcoin was, at the time of writing, trading marginally below the former psychological barrier at $26,870. In contrast, XDC (previously XinFin) Network’s XDC defied the market sentiment early Thursday before cooling and was last trading 11% in the green on the day.
XDC/USD chart. Source: TradingView
The latest events around the US debt ceiling aren’t the only macro catalysts for the short-term volatility fresh into the new month. Analysts contend market participants are also retreating on concerns of the yet-to-be-tamed inflation and in anticipation of the jobs report for May, set to be released on Friday. In an interview on Wednesday, Federal Reserve Bank of Cleveland President Loretta Mester said there is no justification to consider taking the foot off the pedal on rate hikes. Markets anticipate a print of 180,000 jobs in the coming nonfarm payrolls data, with a figure above this likely to bring a sour taste to crypto prices.
Remarking on the debt ceiling deal, BlackRock CEO Laurence Fink opined that the back-and-forth in drawing up an agreement has tarnished the trust and status of the US dollar. In addition to the protracted negotiations, the billionaire investor highlighted the risks of a potential US default as another factor undermining the dollar as the world’s reserve currency. This development has led some observers to bet on Bitcoin benefiting from the chaos.
“I believe we’ll have a resolution […] but let’s be clear, the United States is jeopardizing its reserve currency status,” Fink, who heads the world’s largest asset management firm, said at a Deutsche Bank financial services conference on Wednesday.
The BlackRock executive also noted that the Federal Reserve is not done with interest rate adjustments to bring inflation under control. Fink said he anticipates a minimum of two rate hikes in the near future, citing the absence of any indication of a decline in general inflation. Some analysts have also warned of a potential liquidity problem that may arise as liquidity tightening picks up following the raising of the government’s debt ceiling.
“Liquidity is going to be very net negative. We have to refill roughly $500 billion in the Treasury General Account, this means issuing bonds. With markets purchasing bonds, it means less $ for risk assets,” Messari researcher Tom Dunleavy argued in a tweet.
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