The U.S. Treasury Secretary, Janet Yellen, has recently warned of the catastrophic consequences the U.S. could face if the country hits the debt ceiling without lifting it.
In his recent video CryptosRUs explains that failure to do so could lead to bankruptcy and an unprecedented financial crisis.
Despite this, there is growing opposition to raising the debt ceiling due to concerns about rising inflation and irresponsible money printing in recent years.
As the Federal Open Market Committee (FOMC) meeting approaches, Fed Chair Jerome Powell faces the difficult decision of whether to lift interest rates or let inflation continue to rise.
The U.S. government is on track to raise the debt ceiling again, as they continue to overspend by $1-2 trillion per year. This overspending has led to either borrowing or printing money, ultimately causing cash devaluation through inflation.
Inflation is known to be favorable for assets like real estate, stocks, and bitcoin (BTC), but harmful to cash savings.
According to the YouTuber, if the U.S. defaults on its debt, it could trigger a 70% increase in bitcoin value overnight, as people turn to decentralized assets instead of government-controlled banks.
Bitcoin, which was created as a response to distrust in governments and banks, is now seen by some as a better option amidst growing economic uncertainty.
Treasury Secretary warns of U.S. debt ceiling
The warning comes after the Treasury discovered that tax revenue has been much lower than anticipated. The Congressional Budget Office (CBO) has also echoed Yellen’s assessment, stating on May 1 that there is a higher risk of borrowing capacity running out in early June.
In a letter, Yellen emphasized that federal cash flow is “inherently variable,” meaning the nation’s debt default date might still occur several weeks beyond the worst-case forecast.
She continued, noting that it is impossible to pinpoint the precise day the country might go into default and that, given the projections, it is critical that Congress act as soon as possible to raise or suspend the debt ceiling in a manner that provides longer-term assurance that the government is going to keep making its payments.
Crypto investors buying the fear
Secretary Yellen also warned that the U.S. might be at risk amid the current financial crisis if lawmakers didn’t increase or suspend the nation’s borrowing capacity and avert what might otherwise become a worldwide financial crisis.
Investors are alarmed by Yellen’s letter, expecting a substantial impact and rally of the cryptocurrency market, given that the larger cryptocurrency market is now seen as a component of the global financial system.
Investors’ attitudes are also partially caused by the ongoing crackdown by U.S. officials on crypto businesses and the absence of regulations in the volatile industry.
President Biden invites Hill leaders for meeting
The most recent estimate pressures U.S. leaders and the White House to reach a bipartisan fiscal agreement as cross-party negotiations continue to stall.
The unexpected prediction from Treasury secretary Janet Yellen shocked lawmakers on the Hill, who were expecting to have months to find a solution to the present standoff between president Biden and speaker Kevin McCarthy.
Following this, Biden has invited Hill leaders to a meeting on May 9 to strike a bipartisan fiscal deal.
Yellen is also taking an unexpected step to increase the U.S. borrowing capacity. The Treasury secretary informed lawmakers on May 1 that the department will discontinue assisting state and local governments with debt restructuring so that they can comply with tax laws.
She also pointed out that the decision is not free of expense because it will deny state and local governments access to a crucial tool for managing their finances.
Notably, there is still a chance for a deadline later than early June if the Treasury Department manages to make ends meet.
In other cryptocurrency news, liquid staking is becoming increasingly popular, driving the growth of altcoins and making them more deflationary as more holders choose to stake their coins.
Meanwhile, the craze for meme coins like pepe and wojack continues, with investors urged to exercise caution when investing in these volatile assets.
In a recent Q&A session, crypto YouTuber CryptosRUs also warned investors about the risks of investing in cryptocurrencies, comparing it to gambling in a lottery or roulette.
The YouTuber advised investors to withdraw their initial investments after making profits and to be cautious when investing in coins like pepe, which recently experienced an 83% increase in value.
CryptosRUs also criticized bitcoin sv (BSV), labeling it a “scamcoin” and arguing that bitcoin could achieve mass adoption through mass hodling, similar to gold.