Blackrock CEO Laurence Fink believes that the recent “drama” surrounding the US debt ceiling has deteriorated global confidence in the US dollar, something other analysts predict could provide some tailwinds for Bitcoin. (BTC).
Fink's comments come as US lawmakers approved a long-awaited invoice to lift the debt ceiling of $31.4 trillion on June 1. The US Treasury indicated that the deadline to raise the debt ceiling was June 5. Later, the country could start defaulting on its debts.
314-117: The House passes the Biden-McCarthy debt ceiling deal, raising the debt limit to 2025 and instituting two-year discretionary spending caps.
71 Republicans and 46 Democrats voted "no" on the bill. pic.twitter.com/RdU42whDd5
— The Count (@therecount) June 1, 2023
According to a May 31 report From Reuters, Fink told attendees at a Deutsche Bank financial services conference that he expects at least two more interest rate hikes from the Federal Reserve in the coming months, saying he had seen "no evidence" of reduction of headline inflation.
"I think we will have a resolution... but let's be clear, the United States is jeopardizing its reserve currency status."
Many Bitcoin Advocates and Cryptocurrency Investors See BTC as a hedge against inflation and debt fears triggered by central banks increasing overall money supply.
Josh Gilbert, a markets analyst at eToro, told Cointelegraph that the debt-ceiling drama puts Bitcoin in the spotlight once again, as investors can look to finite-supply safe-haven assets outside of the limitations of the current financial system.
“The debt ceiling agreement once again highlights the utility of Bitcoin because it is essentially a break with the traditional financial system. Given its finite supply, it is free of the problems that the US government is facing right now,” he said.
Still, Gilbert points out that while the united states banking crisis and the debt ceiling debacle highlights the inherent utility of an asset like Bitcoin, any investor expecting current events to provide a massive increase in Bitcoin's value should temper their expectations.
“There is more fear than optimism in the short term due to the uncertainty of these issues and the liquidity problems they will cause,” Gilbert said. “When the banking crisis happened, it lowered inflation and rate hike expectations, so we saw Bitcoin rally.”
These sentiments were echoed by Matteo Greco, a research analyst at investment firm Fineqia International, who said CNBC that the current downward pressure on the price of Bitcoin is mainly due to investor fears of the US hitting the debt ceiling.
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Typically, when central banks raise interest rates, investors opt to pull their money out of riskier assets like cryptocurrencies and growth stocks.
“Since Bitcoin was so depressed in 2022, the expectations of this change in the high interest rate environment caused investors to jump at the opportunity to buy Bitcoin at steep reductions. Rate hike expectations have changed significantly so far this year and in recent weeks,” Gilbert added.
According to Gilbert's assessment, if Fink's fears of more rate hikes come true, this could cause the price of Bitcoin to fall further from its current price. If the opposite happens and the Federal Reserve stops its rate-raising cycle in June, Gilbert says investors can expect to see positive Bitcoin price action.
Bitcoin is currently changing hands for $27,161, down 2% in the last 24 hours and 6.4% in the last month, according to data from the Cointelegraph price index.
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