Some believe the U.S. debt deal will affect the price of bitcoin.

The Treasury's efforts to restore cash balances after the debt ceiling issue is resolved might drain the system of dollar liquidity, driving down the price of bitcoin.
While markets are uneasy due to the impasse in talks to extend the $31.4 trillion debt ceiling for the United States government, some analysts have gone against the grain and warned that a probable agreement might hurt the cryptocurrency market.

While markets are uneasy due to the impasse in talks to extend the $31.4 trillion debt ceiling for the United States government, some analysts have gone against the grain and warned that a probable agreement might hurt the cryptocurrency market.
On January 19, the United States exceeded its statutory debt ceiling of $31.4 trillion, forcing the Treasury to take exceptional steps and deplete the amount in the Treasury General Account (TGA) in order to keep the country afloat. That made sure that in the face of worries of a government default and the Federal Reserve's ongoing rate rises, assets like bitcoin, which are sensitive to fluctuations in the U.S. dollar liquidity, remained in demand.

According to MacroMicro, the TGA balance decreased from around $500 billion at the beginning of February to $68 billion last week. To prevent what some consider to be a catastrophic default, a debt agreement must be struck by early June, when Treasury's cash level is predicted to drop below the minimum necessary $30 billion.
It also implies that the Treasury will try to restore its cash balance by issuing government bonds after the debt ceiling is increased. Increased issuance would typically tend to drive prices down and raise rates, thus this might drain liquidity from the system and put pressure on bond yields to rise. Bond yields and Bitcoin (BTC) are known to move in opposing directions.

Because of this, even if a potential deal may significantly lessen economic uncertainty, assets like bitcoin that have no links to the real economy and depend on fiat liquidity might actually suffer.
"The issuance of debt to top up coffers will have the opposite effect - money will move out of cash and risk assets into U.S. government bonds, especially as yields on these instruments rise to offset the increase in supply," Noelle Acheson, a former head of research at CoinDesk and Genesis Trading and the creator of the Crypto Is Macro Now newsletter, predicted in the weekend edition of her publication.

Because assets that produce nothing often do not do well in high yield situations, she continued, "this could be bad for bitcoin and gold, which in theory fall in price when yields are rising." Furthermore, increasing public expenditure, which is beneficial for the economy, would result from issuing more U.S. government debt, further postponing the possibility of rate decreases.
According to the market consensus up to this point, a default would result in panic selling and a worldwide rush for cash, much as the one that occurred during the coronavirus-caused meltdown in March 2020, when bitcoin fell by more than 50%. A debt agreement is anticipated to encourage risk-taking in the meantime.
Some analysts claim that during the March financial crisis, bitcoin attracted haven bids; however, other rate-sensitive assets, such as tech stocks, also did well as traders priced in an early Fed tilt toward rate reduction. In other words, bitcoin continues to be a risk asset that is highly liquidity-sensitive.
Satyakam Gautam, a rates trader at the Indian-based ICICI Bank, disagrees with that prediction and predicts that the Treasury would most likely issue $700 billion in bonds in the next months, which will trigger extreme risk aversion.

"What it suggests is a paucity of USD financing in the near future, if any, following the conclusion of the successful ceiling discussion. It will be difficult for corporate bond markets and private credit to extend current maturities, which would cause a serious crash in the funding of commercial real estate assets or in the prices of ordinary trash bond issuers. This might be the genuine crash that the U.S. rate markets have been searching for, according to a LinkedIn post by Gautam.
"Long-end rates may then secularly decline, and U.S. rates may sharply steepen. This should bode well for risk-free FX markets like the JPY and CHF, according to Gautam.