- The Biden administration and Republican Kevin McCarthy resumed the debt ceiling discussion hinting at a "positive outcome."
- If the US defaults on its debt, you could see almost 8 million jobs lost.
- Bitcoin and Ethereum trading volumes fall to the lowest level for the second time since 2019.
The world economy is currently preparing for a terrible blow from the USA. As the Biden administration continues to negotiate with Congress to reach common ground, the stock market finds itself worried about impending doom. This fear is also potentially spilling over into the cryptocurrency market.
The US government is nearing default on its debt
US President Joe Biden and top Republican Kevin McCarthy recently engaged in debt ceiling discussions on May 22. Both sides are optimistic about reaching a common ground to end the federal debt stalemate.
Earlier this week, US Treasury Secretary Janet Yellen issued a warning stating that US debt could default in the next ten days before June 1 if talks fail. result in a favorable decision. she said,
"It is very likely that the Treasury will no longer be able to meet all of the government's obligations if Congress has not acted to raise or suspend the debt limit by early June, and possibly as soon as June 1.
Furthermore, Yellen noted that even a last-minute fix should be avoided, as it hurts the economy at the consumer, business, and government levels.
However, McCarthy, before the meeting, reiterated that while the Republicans and the Biden administration still have "disagreements," they will come to a decision soon.
This should be done as soon as possible, as it would take at least another three days to draft the agreement, read it and vote on it.
The global economy is on edge as fears grow over the coming week, with the debt ceiling not being raised beyond the current limit of $31.4 trillion, which could lead to a default on US debt payment
Impact of debt default on cryptocurrencies
According to a White House report, it was highlighted that a debt default could result in the loss of more than 8 million jobs. Unemployment rising by such a large number in an instant could have a negative impact not only on the stock market but also on the crypto market.
The reason behind this is that the US accounts for 10% of cryptocurrency users worldwide. With a total of 45 million of the 420 million crypto users, the country's troubles present a significant threat as crypto users who lose their jobs could be forced to sell their assets prematurely.
As it is, the crypto market's trading volume is currently drying up, with weekly volumes hitting all-time lows. Santiment pointed out that Bitcoin and Ethereum volumes alone combined are seeing the second lowest threshold since September 2019.
Trading volume of the crypto market
For the same reason, the price of Bitcoin and ethereum price, along with the rest of the market, have been looking at a sideways move for the past few days. Investors are bracing for a move in either direction after June 1, as the outcome of the talks would determine profit or loss for crypto asset holders.
BTC/USD 1-day chart
The crypto market continues to encourage talks to come to a conclusion, as even at the risk of losing some investment, the market would be safe from a severe downtrend.
