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Treasury Sec. Yellen warns of US debt limit impact on crypto market

Janet Yellen, the Treasury Secretary for the United States, expressed her concerns about the increasing interest rates and its effect on the government’s budget allocation. This has raised alarm about the possibility of reaching the debt ceiling limit of $31.4 trillion, which could lead to a contentious political argument and destabilize the global economy. The U.S. government has a limited time frame of till June to tackle this issue and in the upcoming months, the effects of a possible default on payment commitments by the U.S. may become more evident. This is a cause for worry for investors in the cryptocurrency market, particularly those invested in Bitcoin (BTC).

Additionally, a debt default could also lead to a decrease in investor confidence in traditional financial markets, causing some investors to seek alternative investments such as cryptocurrencies as a hedge against market volatility. However, it’s worth noting that the impact of a US debt default on the cryptocurrency market would not be limited to just this, it will likely also affect global markets and economies, which in turn could lead to a decrease in demand for cryptocurrencies, leading to a drop in their value. It’s also important to note that cryptocurrency markets are highly volatile and the effects of a debt default on the value of cryptocurrencies would be difficult to predict.

The US government has a history of avoiding default on its debt by implementing alternative measures, such as inflation. One example of this is when President Nixon dropped the gold standard for the US dollar in 1971. However, some experts believe that drastic measures, such as crashing the stock market or damaging the nation’s credit, would harm too many influential individuals and groups in society.

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Therefore, it’s likely that the government will resort to similar methods as before, such as inflation, to address future debt issues. However, it’s important to remember that the actual steps taken by the government will depend on the specific situation of the debt crisis.

It’s true that the US dollar has been the dominant currency for a long time, but there are signs that the world is shifting towards a more diversified system, due to the rising economic influence of other countries and the growing use of digital currencies. In terms of debt default, the US government will probably avoid it, because it would have severe consequences not just for the country, but also for the entire world, considering that the US dollar is the global reserve currency. The government will likely choose alternative measures, such as inflation or negotiation with Congress, to manage the debt crisis instead.

While defaulting on debt is unlikely, there is still a possibility of devaluation of the US dollar as other countries are seeking to challenge its dominance. For example, Russia and Saudi Arabia have recently announced plans to create their own gold-backed stablecoins. However, the instability of traditional financial systems is a serious concern, as experts like Matt Odell are worried that a future recession could lead to bank runs and issues with traditional finance becoming insolvent. In such a scenario, alternative stores of value such as cryptocurrency and gold would likely become more appealing to investors as a safe haven.

A default on its debt by the US government would have a severe impact on the value of the US dollar, which would also affect countries and institutions that hold investments in US dollars and government bonds. As a result, there could be a greater demand for alternative stores of value such as cryptocurrency and gold from large foreign institutions, as they seek to protect their assets from the instability of the traditional financial system.

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Critics may view cryptocurrency as a bubble, but it’s important to understand that the process of mining cryptocurrencies like Bitcoin requires a significant amount of resources such as time, energy, and human labor, making the limited supply of Bitcoin valuable. Furthermore, the decentralized, digital nature of cryptocurrency, such as Bitcoin, makes it not controlled by any government or central authority and its underlying technology, Blockchain, makes it a secure and transparent system that allows for tamper-proof transactions.


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Alexander Fyodorov (Ukraine)

Alexander Fedorov is a new writer on Tokenhell, his articles are about on cryptocurrency news and platform reviews. We recommend keeping an eye on his latest posts as they are always very informative and super interesting.

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