Some problems never truly go away, and one of them is the U.S. debt ceiling, which limits the maximum amount the government can borrow. It is once again in the spotlight, but past experience suggests it could be positive for Bitcoin (BTC) and risk assets in general.
The United States is set to reach a debt ceiling of about $36 trillion on Tuesday, meaning it can no longer borrow from its citizens to fund its operations.
Outgoing Treasury Secretary Janet Yellen said, “While the debt limit does not authorize new spending, it does create a risk that the federal government will be unable to meet existing legal obligations established by Congress and the President in the past.” Ta. Officially announced on Friday.
The very idea that the world’s largest economy won’t be able to borrow anymore may scare investors, but keep in mind that a default or government shutdown isn’t going to happen anytime soon. Yellen said the Treasury Department would implement “extraordinary measures” starting Tuesday to buy time until at least March 14.
One possible measure would be to change the Treasury and General Account (TGA), the Federal Reserve’s government-operated account used to facilitate government payments and collect taxes, duties, securities gains, and public debt receipts. It may be possible to reduce it.
The previous debt ceiling episode in early 2023 involved using the TGA to cover costs and had a positive impact on risk assets, including Bitcoin.
That’s because when the government disburses TGA balances, that cash goes into the commercial bank bank accounts of contractors, employers, and various other entities. This increases the amount of reserves held by commercial banks. With more reserves, there is a better ability to lend money, which can lead to more lending and investment in the broader economy and financial markets.
As of Monday, the balance in the Treasury Department’s general account was $677 billion.
This chart shows the change in Bitcoin price and Treasury General Account (TGA) balances over the past five years.
Notably, TGA drawdowns frequently coincide with Bitcoin bull markets, suggesting an inverse correlation between the two.
