What happened
The stock market is closed in the US on Monday, so the only way to trade the debt ceiling deal has been in crypto, which has moved sharply upward in recent days. Counting from the market close at 4 pm ET on Friday, Bitcoin (BTC 0.31%) has risen 3.3%, Ethereal (ETH 0.33%) jumped 2.8%, dogecoin (DOGE 0.25%) has risen 3% and Solarium (SUN 0.29%) it has moved 4.8% higher.
This is despite the modestly negative trade on Monday. From Wednesday's low to Sunday night's high, Bitcoin jumped as much as 10.1%, Ethereum rose 9.6%, Dogecoin jumped 7.9%, and Solana rose 13.3%.
Image source: Getty Images.
So what
A deal was struck over the weekend to avoid hitting the US debt ceiling, which could have caused defaults on hundreds of billions of dollars in debt starting this week.
To be clear, the bill is not law yet. The text of the bill was published on Sunday night and will have to be voted on by lawmakers this week. But market makers certainly expect it to happen. There will be some limits on discretionary spending and recoveries of unspent COVID-19 funds as part of the bill, indicating that there was some give and take to reach a compromise.
The market's focus now shifts to interest rates, which have been rising for more than a year. Investors are hoping that slowing inflation will mean halting or even reversing interest rate hikes. That may be wishful thinking, but it is what traders are hoping for at the moment.
Now what
There was no real fundamental cryptocurrency news this week, so the move is really a trading phenomenon of the financial markets. The strange thing is that crypto values โโrise as the stability of the US dollar improves. Cryptocurrencies, and Bitcoin specifically, were supposed to be the counter currency to establishment, but prices react positively when the current system is stable.
We have also seen higher cryptocurrency trading alongside growth stocks this year, continuing the correlation between the two that began in late 2021.
I think the biggest thing to watch interest rates is US regulators and the 2024 election. Crypto could become an even bigger target for some regulators in the next year and likewise if there is a change in the leadership to a more crypto-friendly US President or Congress that could boost cryptocurrency values. But right now, it seems like the government is squeezing cryptocurrencies to the max. This will make it more difficult for developers to build blockchains like Ethereum and Solana, which are made for utility and not just stores of value.
As much as I think the debt deal is positive for the economy and the markets in general, I don't see it having much of an impact in the real world on cryptocurrencies. In fact, the stability in the US is not doing any favors to those trying to build a new financial structure, so this is a bounce that I do not agree with today.
Travis Hoium He has positions in Ethereum and Solana. The Motley Fool has positions and recommends Bitcoin, Ethereum and Solana. The Motley Fool has a disclosure policy.
