Bitcoin, Ethereum, and Dogecoin Jump on Debt Ceiling Deal

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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 risen sharply in recent days. As of market close at 4 p.m. ET on Friday, Bitcoin (BTC -0.06%) is up 3.3%, Ethereum (ETH -0.02%) jumped 2.8%, Dogecoin ( DOGE -0.10%) is up 3% and Solana (SOL -0.14%) is up 4.8%.

And this, despite slightly negative exchanges on Monday. From Wednesday’s low to Sunday night’s high, Bitcoin jumped 10.1%, Ethereum 9.6%, Dogecoin 7.9% and Solana 13.3%.

Image source: Getty Images.

So what

Over the weekend, an agreement was reached to avoid hitting the debt ceiling in the United States, which could have led to defaults on hundreds of billions of dollars in debt as early as this week.

To be clear, the bill is not yet law. The text of the bill was just released on Sunday evening and lawmakers will have to vote this week. But market makers certainly expect it to pass. There will be caps on discretionary spending and clawbacks of unspent COVID-19 funds under the bill, indicating that there have been concessions to achieve a compromise.

The market’s attention is now on interest rates, which have been climbing for more than a year. Investors are hoping that slowing inflation will mean a halt or even a reversal in interest rate hikes. That may be wishful thinking, but that’s what traders are hoping for right now.

Now what

There hasn’t been any truly fundamental cryptocurrency news this week, so the move is very much a financial market trading phenomenon. What is strange is that crypto values ​​are rising as the stability of the US dollar improves. Crypto, and Bitcoin in particular, was meant to be the anti-establishment currency, but prices react positively when the current system remains stable.

We have also seen crypto trading increase with growth stocks this year, continuing the correlation between the two that began in late 2021.

I think the more important thing to watch than interest rates is US regulators and the 2024 election. Crypto could become even more of a target for some regulators over the next year, and even Suddenly, if there is a change of direction towards a more crypto-friendly US President or Congress that could boost crypto values. But right now, it looks like the government is pushing crypto as hard as they can. This will make it harder for developers to rely on blockchains like Ethereum and Solana, which are designed to be utilitarian and not just stores of value.

While I think the debt deal is positive for the economy and markets in general, I don’t see them having much real impact on crypto. In fact, stability in the United States does a disservice to those trying to build a new financial structure, so this is a rebound that I do not subscribe to today.

Travis Hoium has positions in Ethereum and Solana. The Motley Fool has positions and recommends Bitcoin, Ethereum, and Solana. The Motley Fool has a disclosure policy.

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