The debt ceiling is the maximum amount of public debt the federal government can accumulate. Under the constitution, Congress must approve debt issuance. This, in turn, enables the government to borrow to meet existing obligations such as social security benefits, military salaries, tax refunds and other similar payments.

In such cases, the government can raise the debt ceiling and thereby increase the amount of public spending. For example, the debt ceiling was raised during Barack Obama's presidency, following the first-ever downgrade of the U.S. national debt by Standard & Poor's.

Analysts say the United States has never failed to make payments on the national debt. In fact, this is one of the reasons why US Treasury securities are so popular among investors around the world, and the dollar is one of the most secure fiat currencies.

What will happen to cryptocurrencies in default

CBO analysts have warned of a high probability of “a huge amount of trouble” for the US government if the debt ceiling issue is not resolved by June. Here’s a quote from their report on the matter, cited by Cointelegraph.

The Congressional Budget Office predicts that if the debt ceiling remains unchanged, there is a significant risk that at some point in the first two weeks of June the government will no longer be able to pay all its obligations.

It should be noted that the US president will hold a meeting regarding the prospects of default as early as today. Accordingly, this issue is at the top of the agenda, i.e. its importance is obvious to all.

According to the sources, the US federal budget deficit in 2023 will be about 1.5 trillion dollars, which is 100 billion dollars more than predicted. That said, there is now a case pending before the Supreme Court regarding the write-off of outstanding student loan debt. It could have a significant impact on overall budget revenues for 2023.

Lack of tax revenue was also highlighted as a potential factor in a larger budget deficit than originally projected. However, the US Congressional Budget Office does not expect the deficit growth to decrease any time soon. Within a decade, the figure will reach the $2.7 trillion bar, that is, by 2033.

In general, this year and the years to come will be a period of record external debt for the USA, which in theory will put serious pressure on the value of the dollar worldwide along with the global economy. Such a situation could benefit Bitcoin – as former Coinbase CTO Balaji Srinivasan has previously stated. Recall, he even made a bet on BTC to actively grow to a million dollars by the summer of 2023 due to the problems in the US economy, but later backed out of the deal and lost.

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Bitcoin’s attractiveness as a hedging tool is also confirmed by the results of a recent Bloomberg survey. The publication’s analysts found that gold, BTC and US bonds would gain the most popularity among investors in the event of a default. The survey was conducted between May 8 and May 12, and 637 respondents took part in it. They included both professional institutional investors with large capital and individual investors, i.e. relatively small players.

More than 50 percent of survey participants said they would be willing to buy gold if the US government fails to avoid a default on its debt. US treasury bonds were the second most popular, while Bitcoin was ranked third.

That is, the main cryptocurrency has already become a more popular investment in a certain hypothetical situation than the US dollar, Japanese yen or Swiss franc. More specifically, about 8 percent of professional investor respondents and 11 percent of retail investor respondents said they were more willing to buy Bitcoin.

Earlier, US President Joe Biden said that “the whole world would face huge problems” if America declares itself insolvent on its debts. It is also important to realise that such a scenario would negatively affect Biden’s rating for the next US presidential election in November 2024, i.e. the president’s interests are completely opposite here.

Accordingly, a consensus on another increase of the debt ceiling can be expected in this situation. However, this would in theory affect the strength of the dollar and its popularity around the world, experts say.

However, as long as the debt ceiling hasn’t been raised, we should probably expect a surge of volatility in financial markets if the situation gets out of hand.


We believe Bitcoin, along with other cryptocurrencies, will indeed become a much more attractive investment for ordinary people in the event of major economic problems. In such a scenario, the most important characteristics of digital assets would be their decentralisation and independence from authorities, along with limited issuance rates and ultimate inflation. As the current situation in the economy shows, sometimes bankers can make the wrong decisions, which in doing so affect all people. Accordingly, insuring some capital against such mistakes is not a bad idea.


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