The U.S. debt ceiling, now at a critical $36 trillion, may signal a temporary correction in Bitcoin’s price, with the cryptocurrency potentially dropping to $70,000 before entering its next market cycle phase. This comes as the U.S. Treasury is set to hit its debt ceiling just one day after President-elect Donald Trump’s inauguration on January 20. Treasury Secretary Janet Yellen announced a “debt issuance suspension period,” effective January 21 and lasting until March 14, as detailed in a letter released on January 17.
This two-month suspension could lead to a decrease in global liquidity, which is a red flag for Bitcoin’s price momentum. Even after rising to set a new all-time high above $109,000 on January 20, there is room for a “local top” of sorts above $110,000 in January before a potential selloff to sub-$70,000 by February, GMI’s Raoul Pal suggested.
According to Pal, who posted the analysis on November 29, the position is that Bitcoin’s price mirrors the global liquidity index, which could rise to $110K but would then start to pull down after that. However, as the suspension period ends, it just might plummet for a while because liquidity shrinks in the interim.
Analysts have different views about what will likely happen to the price of Bitcoin if the debt ceiling is hit. While traditional markets may face tighter liquidity, some believe Bitcoin could benefit from institutional behavior. As it has been in the past during debt limit talks, Marcin Kazmierczak, co-founder and COO of Redstone, said that Bitcoin could be seen as an insurance policy against monetary uncertainty. Since it’s not clear how Bitcoin will interact with standard market value liquidity, as Kazmierczak put it, investors’ actions will determine Bitcoin’s future trends.
Alvin Kan, COO of Bitget Wallet, said something similar in his views, saying that changes in the traditional market could easily happen in the cryptocurrency market as well. He also said that a worse environment for risk assets might be bad for Bitcoin. The outcome will rest on how investors feel, how the economy is run, and the level of risk in global finance.
Following the short-term correction, conditions for global liquidity are projected to improve after March 14, which will boost the Bitcoin price. Jamie Coutts, Real Vision’s Chief Crypto Analyst, sees the creation of more exceptional global M2 money supply and believes Bitcoin will reach $132,000 by December 2025.
There have also been new optimistic price projections reported. According to van Eck of the asset management firm, Bitcoin might reach $180K following a modest downturn of around 30% in Q1 2025. These projections show to Bitcoin’s longer-term potential, despite present short-term hurdles in the shape of the US debt ceiling.