US Debt Ceiling Increase: Impact on Crypto and the Economy

US avoids default by raising debt ceiling. Find out the consequences for the global economy and crypto markets, including Bitcoin.

The United States has once again raised its debt ceiling to avoid default and ensure the uninterrupted functioning of the government.

This decision comes amidst an economic environment of widespread global turmoil and a steadily increasing national debt.

The US debt ceiling represents a limit on government financing through borrowing, which is needed to cover mandatory legal payments such as Social Security, Medicare, pensions, and interest on the national debt. This issue regularly generates heated political debates.
The raising of the limit leads to protracted discussions between Congress and the White House about spending priorities.

The Senate Joint Economic Committee (JEC) has published data that offer a clear picture of the nation's financial health. As of April 2025, the US national debt exceeded $36.2 trillion, up sharply from the $22 trillion recorded in March 2019. This rapid growth highlights the persistent difficulties in managing public finances.

Adjusting the debt ceiling is a historical necessity. An analysis of the NPR shows that Congress has intervened 78 times since 1960, including increases, temporary extensions or revisions to the definition. Of these interventions, 49 occurred under Republican presidencies and 29 under Democratic presidencies, demonstrating the bipartisan nature of the problem.

The constant need for intervention raises doubts about the long-term sustainability of the US fiscal framework.

The economic landscape has been further complicated by the aggressive trade policies of Donald Trump's administration, which has imposed 125% tariffs on Chinese imports. China responded with retaliatory tariffs of 84% on US goods.

Currency markets experienced immediate changes. The Chinese yuan (CNY) hit an 18-year low, with the USD/CNY exchange rate at 7.394. The yuan's devaluation exacerbated trade tensions and destabilised global financial markets, including cryptocurrencies.

Impact on Cryptocurrency Markets: A Two-Sided Medal

The raising of the US debt ceiling has complex implications for the cryptocurrency market, with both immediate and future effects.

Investors usually breathe a sigh of relief after the ceiling increase, avoiding an imminent default. However, the restored confidence in traditional financial markets (equities and government bonds) reduces interest in Bitcoin as a safe haven asset.

During periods of uncertainty related to the debt ceiling, many investors chose Bitcoin as a protection against economic instability, increasing its price, as was the case during the 2021 crisis. However, when the situation stabilises and investors return to traditional assets, Bitcoin and altcoin prices tend to fall.

Chinese investors could instead direct their capital to cryptocurrencies if US policies devalue the yuan. The loss in value of the Chinese currency prompts investors to seek protection in cryptocurrencies, thus increasing activity in the crypto market.

The US government continues to finance government spending through increases in the debt ceiling, leading to more debt. The printing of new money and the issuance of Treasury bonds contribute to the expansion of the money supply. These strategies cause inflation and devalue the dollar.

Bitcoin's limited number and its decentralised system attracts those seeking to hedge against inflation. The dollar's loss of value pushes investors to diversify to preserve purchasing power. Bitcoin is increasingly seen as 'digital gold', a safe haven in times of turbulence.

The rising debt ceiling makes forecasting cryptocurrency movements difficult.

In the short term, the stability of traditional markets could reduce demand for crypto assets. However, in the long run, cryptocurrencies may become attractive again for those seeking protection from wealth loss, inflation resistance and alternative opportunities in an environment of continued debt and possible currency devaluation.