The world’s largest cryptocurrency Bitcoin (BTC) has once again come under strong selling pressure and is trading 2.48% down at a price of $27,116 with a market cap of $525 billion. Although there were talks of the US planning to raise its debt ceiling earlier this week, the deal has yet to come to fruition.

Earlier this week, the BTC price surged past $28,000 on the optimism surrounding the debt ceiling. However, this move was short-lived and Bitcoin is facing major selling pressure over the last two days moving it close to $27,000Along with Bitcoin, the broader cryptocurrency market is down by 1.89 while altcoins have also dropped close to 2%.

Last Sunday, US President Joe Biden and House Speaker Kevin McCarthy reached a deal to suspend the debt ceiling until January 1, 2025. If the lawmakers agree for raising the debt ceiling, the US Treasury would issue $1 trillion of debt to replenish its Treasury General Account.

The deadline to raise the debt ceiling is just a week away or else the US would default for the first time ever. This could potentially send shockwaves across the global financial markets hurting risk assets like stocks and crypto, majorly. In a note on Tuesday, May 30, Edward Moya, senior market analyst at foreign exchange Oanda wrote:

US Quantitative Tightening Ahead?

Although the US might get itself out of trouble by raising the debt ceiling, analysts aren’t optimistic about the future scenario. This is because raising the debt ceiling would give the Federal Reserve some room to raise the interest rates further.

Thus, analysts have also revised their expectations for a dovish monetary policy by the US Fed. As per the CME FedWatch Tool, there’s a 66% probability that the Fed will raise interest rates by 25 basis points for the fourth consecutive time in the June meeting. A week ago, this probability was just 28%.

Further quantitative tightening by the Fed will lead to a liquidity crunch in the market and is not a good case scenario for risk-ON assets such as equities and crypto. This would significantly dampen the prospects of a rally in Bitcoin and the broader crypto market.

It will be interesting to see whether Bitcoin continues to show resilience to the macro events, as it did ahead this year. In an interesting prediction, JPMorgan analysts said that Bitcoin could climb to $45,000 this year if it adopts a Gold-like market structure.