Summary:
U.S. debt ceiling hits $36 trillion on Tuesday, raising concerns for investors.
Treasury Secretary Janet Yellen warns of risks but plans extraordinary measures to delay defaults.
Draining the Treasury General Account (TGA) could positively impact Bitcoin (BTC) prices.
Previous debt ceiling measures in early 2023 led to bull runs in Bitcoin.
Current TGA balance is $677 billion, which could fuel lending and investment.
U.S. to Hit Debt Ceiling on Tuesday. Will Bitcoin Soar or Suffer?
The U.S. debt ceiling is once again a hot topic as it approaches its limit of roughly $36 trillion. The government's borrowing cap raises concerns, but history shows it could benefit Bitcoin (BTC) and other risk assets.
What’s Happening?
The government will hit its borrowing limit on Tuesday, which means it cannot take on new debts. Outgoing Treasury Secretary Janet Yellen has warned that while the debt limit does not authorize new spending, it poses a risk to financing existing obligations.
However, a default or government shutdown won't occur immediately. Yellen announced that the Treasury will implement "extraordinary measures" starting Tuesday, buying time until at least March 14.
Potential Positive Measures
One of these measures could involve draining the Treasury General Account (TGA). This account collects taxes and facilitates payments. A previous episode related to the debt ceiling in early 2023, where the TGA was utilized to cover expenses, positively influenced risk assets, including Bitcoin.
When the TGA balance is spent, the cash flows into various entities' bank accounts, boosting commercial bank reserves. This increase enhances their lending capacity, which can stimulate investment in the economy and financial markets.
As of Monday, the TGA balance stood at $677 billion.
The chart above displays the correlation between Bitcoin's price and changes in the TGA balance over the past five years. Notably, reductions in the TGA have often coincided with Bitcoin bull runs, indicating an inverse correlation.
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