What is Debt default? How the US Economy Risks could Impact Crypto Market?
Crypto Market News: The US lawmakers are struggling with increasing concerns about recession and slowdown of the economy to control the country’s borrowing. This means that the country is not reducing its borrowings enough to maintain the debt ceiling. The US Treasury Department recently announced that it was taking extraordinary measures to prevent the country from defaulting on its debt. The $31.4 trillion debt limit was established by Congress in 2022. This limit was broken recently by the US.
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What is Debt Default?
A country is considered to be in default if it fails to repay its debts. A default on debt would have a negative impact on the country’s economy. It could affect stock markets, increase inflation risk, and raise interest rates. The current global macroeconomic situation could lead to the US being declared in a recession if it defaults. The risk of defaulting on debt is being warned by voices in the US.
Brian Moynihan (CEO of Bank of America) stated that the possibility of US debt default is something that should be considered in terms of preparation. Moynihan spoke to CNN and said that banks should be prepared for default.
“We must be prepared for it, not only in this country, but also in other countries around world. It’s possible to hope it doesn’t happen, but hope itself is not a strategy. So prepare for it.
Recession Worries for Crypto Market
If this happens, the crypto market could be at serious risk. Panic selling on stock markets and high liquidity by traders could lead to cryptocurrency prices falling. The pandemic that struck in early 2020 caused a slowdown in economic activity, and a stock market crash that led to cryptocurrencies’ price decline. If the US defaults, a similar scenario could occur again. The popular sentiment in the market is that a recession could cause a massive selloff and price crash for cryptocurrencies.
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