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On May 25, as a result of investor panic caused by political divisiveness in debt ceiling talks, the price of bitcoin temporarily dropped below the $26k mark. As a result of Republican President Mitt Romney and US President Joe Biden's failure to achieve agreement on the debt ceiling, Fitch Rating put the US's "AAA" credit rating on negative watch.
The market valuation of cryptocurrencies continues to decline this week, falling 2% further on Thursday. The value of the global cryptocurrency market has fallen below $1.10 trillion, and popular altcoins including Ethereum, XRP, Cardano, Polygon, and Solana are on the verge of breaching crucial support levels.
The "AAA" Long-Term Foreign-Currency Issuer Default Rating (IDR) of the United States has been placed on Rating Watch Negative by rating firm Fitch. If the administration of President Joe Biden and congressional Republicans do not increase or spend the debt ceiling by June 1st, Fitch stated it will degrade the rating.
The US Treasury will run out of money by June 1, according to Treasury Secretary Janet Yellen. With an opening balance of $636 billion for the current fiscal year, the Treasury General Account decreased from $316 billion earlier in May to $57 billion.
The country's post-default ratings, treasury bills, and debt instruments will all be impacted by Fitch's downgrading. A 2011 S&P rating drop in the US led to more downgrades and a significant stock market sell-off.
"However, we believe risks have increased that the debt limit won't be raised or suspended before the X-date and as a result, that the government may start to default on some of its debts."
The US debt default danger is increasing, and this week's Treasury funding shortage contributed to a lower opening of the Asian stock market. Although House Speaker Kevin McCarthy is optimistic that a compromise can be reached by the deadline of June 1st, the selloff has already begun as a result of the debt ceiling brinkmanship.
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