Cryptocurrencies struggle over US debt deal concerns

Cryptocurrency prices surged over the weekend and early on Monday after the announcement of a deal on the US debt issue. Risk sentiment was briefly renewed, boosting crypto markets. The rally was short-lived, however. Most major cryptocurrency prices struggled to hold on to their gains on Wednesday ahead of the critical US debt decision. Risk sentiment fluctuates, causing volatility in risk assets, such as cryptocurrencies. 

Lingering concerns of a US debt default are causing economic uncertainty, inducing volatility in cryptocurrency prices. Increasing US debt fears have been driving risk sentiment down, putting pressure on cryptocurrencies. 

US President Joe Biden and Republican House Speaker Kevin McCarthy announced over the weekend that they have reached a tentative agreement to suspend the federal government's debt ceiling. The deal, however, will have to pass through Congress before the US runs out of resources to meet its obligations. The deal to increase the debt ceiling was presented to the US Congress on Wednesday despite opposition from hard-right Republicans. US lawmakers will be called to assess the deal with little time to spare.

Bitcoin price dipped on Wednesday, touching the $27,000 level. If the BTC price declines, support can be found near $26,000, while resistance may be encountered near $29,000. Reports that Tether, the largest asset-backed stablecoin, would invest up to 15% of its net profit into Bitcoin every month boosted Bitcoin. 

Ethereum price plummeted on Wednesday touching the $1,860 level. If Ethereum's price declines, it may encounter support near $1,740, while if it increases, resistance may be encountered at $2,000.

Signs that major central banks are starting to wind down their hiking cycles provide support for risk assets. The Federal Reserve raised interest rates by 25 basis points at its latest monetary policy meeting, bringing the benchmark interest rate to a 16-year high target range of 5.00% to 5.25%. The US Central Bank has signaled that its hawkish policy is coming to an end, boosting risk assets. 

BTC/USD 1h Chart

ETH/USD 1h Chart

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Written by:
Myrsini Giannouli

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