Bitcoin and Ether slide as debt ceiling talks weigh on investors

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Representations of the virtual currency Bitcoin are placed on US dollar banknotes in this illustration taken May 26, 2020.

Dice Ruvic | Reuters

The crypto fell along with stocks on Wednesday as investors worried about the debt ceiling and the Federal Reserve’s upcoming move.

Bitcoin fell more than 3% to $26,207.42, according to Coin Metrics. Ether lost roughly the same amount and was trading at $1,787.17.

The move coincided with a decline in US stocks. The Dow Jones lost nearly 300 points while the S&P 500 and the Nasdaq Composite fell about 1% each.

On Wednesday, Chairman Kevin McCarthy said debt ceiling talks were still on hold on spending levels with eight days before the United States risks a default. He also said he believed the negotiating teams could make progress on Wednesday.

“Markets opened quite low after falling significantly yesterday, so this could be a reaction to that,” said David Wells, CEO of Enclave Markets. “Even though crypto is a global market, volumes increase quite a bit during US trading hours, so sometimes big moves in crypto follow big moves in stocks that are macro-focused.”

As investors monitor the ongoing debt ceiling negotiations in Washington and investors’ expectations for higher rates rise, bitcoin has started to behave like a risky asset again, just as it was beginning to trade more in tandem with gold earlier this year.

Bitcoin and Ether are on course for their worst month of 2023, down 10% and 6%, respectively. Bitcoin is down nearly 8% for the quarter, after ending the first quarter up 71%. Ether is down 2%, after posting a 52% gain in the first quarter.

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