U.S. Debt Ceiling Deadline Looms, Suggesting Bitcoin Could Be Near Cycle Bottom.

Treasury Secretary Janet Yellen has warned that the U.S. will likely hit its debt ceiling between January 14 and January 23, coinciding with the inauguration of President-elect Donald Trump. In a letter to House Speaker Mike Johnson, Yellen explained that once the debt ceiling is reached, the Treasury will take “extraordinary measures” to manage borrowing until Congress acts.

“I respectfully urge Congress to act to protect the full faith and credit of the United States,” Yellen wrote. The debt ceiling had been suspended in June 2023 until January 1, 2025, but with the deadline fast approaching, immediate action is needed to avoid potential financial turmoil.

The news caused a sharp decline in risk assets, with U.S. equities dropping and the S&P 500, Nasdaq 100, and Dow Jones Industrial Average each falling by approximately 1%. Bitcoin also experienced a significant drop, falling up to 4% from its intraday high.

Historically, raising the debt ceiling has been a negative catalyst for Bitcoin, which has underperformed or seen declines in the days following such events. On the last five occasions when the debt ceiling was increased, Bitcoin’s price took a hit.

Bitcoin has had a challenging December, currently down 3%, marking its first negative month since August. To add to the uncertainty, President-elect Trump’s inauguration on January 20 coincides with the time frame Yellen outlined for the debt ceiling issue, further intensifying the market’s concerns.

The U.S. debt ceiling was first set at $45 billion in 1939 and has been raised 103 times as government spending has continued to outpace revenues. The current national debt stands at over $36.2 trillion, according to Zerohedge.

Bitcoin’s price is also being influenced by its historical cycles. Since the market low following the FTX collapse in November 2022, Bitcoin has followed a pattern similar to previous market cycles. With nearly a 500% return, Bitcoin is now at a stage that mirrors the previous cycles, which were followed by significant corrections.

Given this historical context, there is speculation that the debt ceiling issue and Trump’s inauguration on January 20 could mark a bottom for Bitcoin, potentially signaling a reversal in its price trend similar to past cycles.