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How Could US Economy Risks Affect Crypto Market?

  • A US debt default in the next months might cause a recession, job losses, and a crypto collapse.

  • Due to frenetic trading and stock market selling, cryptocurrency prices may decrease.

07 Feb 2023 By : COIN GABBAR
How Could US Economy

If the US economy experiences a debt default in the next months, it may potentially lead to concerns about a recession, job losses, and a drop in cryptocurrency.

The US Congress is working hard to keep borrowing under control despite mounting worries about a recession and slowdown in the economy. This indicates that the nation is failing to reduce its borrowing in order to stay under the debt cap. Unsettlingly, the US Treasury Department recently announced that it was taking exceptional steps to prevent the nation from going into default on its debt. The $31.4 trillion debt ceiling cap was set by Congress in 2022, and the US recently went above it.

What Is Default on Debt?

A nation defaults on its debt when it doesn't pay back its obligations. Such a default would be detrimental to the economy of the nation, affecting stock markets, raising the danger of inflation, and driving up interest rates. If the US defaults, it may well be declared that it is experiencing a recession in the current global macroeconomic situation. In the US, more people are speaking out against the dangers of the potential for debt default.

In a recent statement, Bank of America CEO Brian Moynihan stressed that the prospect of a US debt default should be evaluated in terms of readiness. Moynihan suggested that banks should be ready in case of failure when speaking to CNN.

Not just in this country, but also in other nations throughout the world, we must be ready for that. You prepare for it even though you hope it doesn't happen because optimism is not a plan.

Market Concerns for Cryptocurrencies

In this regard, if such a debt default materialises anytime in 2023, the cryptocurrency market may be in danger. Prices of cryptocurrencies could fall as a result of frantic trading and stock market selling. Early in 2020, when the pandemic broke out, the stock market crashed, the economy slowed down, and this caused the price of cryptocurrencies to fall. If the US goes into default, a similar situation can arise again. At the very least, the prevailing opinion on the market is that a recession might lead to a significant selloff and a price crash in cryptocurrencies.