The U.S. Government is on the brink of suspending its $31.4 trillion debt ceiling, ending months of intense bipartisan negotiations. This news was met with a positive response from Bitcoin and the larger cryptocurrency market. House Speaker Kevin McCarthy stated on May 27 that he and President Biden reached a preliminary agreement he believed merited the approval of the American people.
The main point of contention during negotiations was non-defense domestic spending. Republicans argued for reduced spending to slow U.S. debt accumulation, while Democrats pushed for increased taxes on the wealthy and corporations to shrink the debt. President Biden, presenting the deal as a compromise, underscored its significance in trimming expenditure while preserving vital programs aimed at boosting the economy and supporting the working class.
The standoff over the debt ceiling was feared to potentially trigger a U.S. default, which could result in dire economic consequences. President Biden shared these concerns, warning that such a default could precipitate an economic recession, cause substantial damage to retirement accounts, and lead to significant job losses. The Treasury Department had also cautioned that without this deal, the federal government could potentially default on its obligations by June 5.
The new agreement will suspend the debt limit until January 2025 and limit spending in the 2024 and 2025 budgets. It includes measures to recoup unused COVID funds and introduces additional work requirements for food aid programs, as reported by Reuters.
While the proposed deal has been agreed upon in principle, it must still pass through Congress, requiring cross-party support. As traditional markets were closed, the initial market response was discernible in the cryptocurrency sphere, which witnessed a 1.3% increase.
Bitcoin surged past the $27,000 mark during early trading hours, and other leading digital currencies, including Ethereum, Cardano, BNB, and Dogecoin, also reported gains.
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