• Bitcoin price rallied amid cautious optimism over a tentative deal to lift the U.S. debt limit.
• The news left the U.S. dollar, which has risen during the debt deal impasse, in a weak spot and pushed BTC price higher.
• A decisive debt deal is considered long-term bearish for Bitcoin on fears that it would remove liquidity from the market.
Bitcoin Price Rallies Amid US Debt Limit Deal
Bitcoin price rallied amid cautious optimism over a tentative deal to lift the U.S. debt limit, leading to a drop in US dollar value and pushing BTC prices higher.
US Debt Limit Deal
President Joe Biden and House Speaker Kevin McCarthy confirmed that they reached an agreement to raise the U.S.’s borrowing limits after Treasury Secretary Janet Yellen’s warning that failure to do so could leave the government without cash by June 1st. This caused the US dollar index (DXY) to drop by 025% but later recover its losses as traders seek stability above $28,000, a psychological support/resistance level for BTC prices at the time of writing this article changed hands for over $28450, its highest level in two weeks. However, short-term profit-taking sentiment among day traders pushed the price lower toward $27850 later in the day still up 10% compared to its recent market low below $26000 on May 25th .
From a technical perspective, Bitcoin looks ready for a short term correction toward $25000 as it has consolidated inside a descending triangle range since March 23rd and tested its upper trendline as resistance and dropped on May 29th .
Long-Term Bearish Sentiment
A decisive debt deal is considered long-term bearish for Bitcoin on fears that it would remove about $1 trillion worth of liquidity from the market due to its negative correlation with DXY and other foreign currencies when traded against each other .
In conclusion , Bitcoin’s recent rally appears connected to optimism surrounding US debt limit negotiations which weakened USD value and increased trading activity around BTC/USD pairings . Despite this , caution should be taken into account when considering long-term investments with potential bearish sentiment still lingering around such decisions .