It's just a matter of days before the United States government runs out of Money that's right the largest economy In the world has heated that ceiling of 31.4 trillion dollars preventing it from Borrowing any more cash as a result the U.S risks at default if its debt ceiling Is not raised by June 1st U.S treasury Secretary Janet Yellen said the risk is Real and the consequences would be Catastrophic for the U.S and the global Economy but How likely is the default Scenario are we really on the brink of Disaster and how is this crising Affecting Global markets and your crypto Portfolio we answer all these questions In this video before we get started Don't forget to hit the like button and Subscribe to our Channel also turn on The notification Bell to keep you up to Date on the latest videos I'm Giovanni Your host and this is a cointelegraph Report First of all what is the debt ceiling The debt ceiling is the upper limit on The amount of money the US government Can borrow like most governments the U.S Spends more money than it takes in That's why it issues treasury bonds a Treasury bond represents a loan that Investors make to the U.S government Which will be paid back with interest Within a specific time by borrowing Money through treasury bonds the
Government can pay for various expenses From Healthcare to Social Security U.S Debt has been skyrocketing in the last Few decades and back in January it hit The current ceiling of 31.4 trillion Dollars Janet Yellen the U.S treasury secretary Said the government would run out of Money as soon as June 1st if the debt Ceiling wasn't raised before that date That would mean at default a situation Where the U.S treasury cannot make Payments to investors holding the Government bonds to avoid that scenario An agreement must be reached between Democrats and Republicans in Congress Republicans are demanding spending cuts In several sectors as a condition to Lift the ceiling while Democrats while The ceiling lifted without any Precondition the negotiations are still Ongoing and no agreement has been Reached so far so what will happen if an Agreement won't be reached in time and The U.S defaults on its debt there are Two possible scenarios the first one is The classic default the government stops Paying debt obligations to bondholders With catastrophic effects the stock Market would crash millions of jobs Would be lost and the economy would Likely plunge into a recession obviously A USB default will have devastating Implications for the Global Financial
System which is largely built around Trust in the U.S economy a second milder Scenario is the technical default in Such a scenario the government delays The sum of the payments for a more or Less extended period of time while Milder than a classic default this Scenario will still cause major economic Distress something similar happened in 1979 when the treasury had to delay Payments to individual investors due to A technical glitch that small delay Resulted in a spike in treasury yields Costing the government billions of Dollars so what are the chances that the US will actually miss the deadline and Default on its debt well the risk may Never have been so high according to a Bloomberg survey investors believe the Risks of default are now higher than They were in 2011. back then the US Government was very close to the Politics on its debt that resulted in a Major market crash and the U.S credit Rating was downgraded for the first First time from AAA to double A plus the Lower the credit rating a country has The risk security is to invest in its Debts and the harder it is for that Country to raise money by issuing bonds To avoid an even worse scenario this Time lawmakers will probably find an Agreement perhaps at the very last Minute
At least that is what markets seem to be Expecting at the moment now what does This debt ceiling crisis mean for crypto And the broader Market Man analyst and writer at coin Telegraph Gave us his predictions if the depth Ceiling is not increased I think Initially it's going to be really Negative for risk markets and that Includes stocks that includes Bitcoin That includes Commodities I think Everything will go down in price in the First moment there will be panic and That's not all a potential us default Would be particularly dangerous for Dollar backed stable coins many of these Stable coins reserves are backed by U.S Treasury bills which means they could Debug in case of a default To avoid that scenario the issue of usdc Circle has recently rebalanced its Reserves but here is the bullish take According to a recent Bloomberg poll Bitcoin would be one of the top three Assets the retail investors would buy to Protect their wealth in case of a U.S Default that means regardless of whether The default will happen or not Bitcoin Is increasingly seen as a safe haven Against a major collapse of the Financial system even safer than the US Dollar and other major Fiat currencies That is not surprising the dollars Decline as a global Reserve currency is
Already underway and it would inevitably Accelerate in case of any fault we'll Make another video about the D-dollarization soon so stay tuned like The recent banking crisis a potential U.S default highlights the need for an Alternative to the traditional Financial System which is heavily dependent on the Arbitrariness of U.S politics people Have to look elsewhere to park their Money they will not Trust Banks they Will not be be buying uh Treasures so They will have to look for alternative Assets and I think that's a moment when Gold and cryptocurrencies during Bitcoin Will benefit to conclude an asset like a Bitcoin which is outside the control of Governments and with a limited Supply Becomes highly attractive in situations Like this and a future where it will Replace at least in part the US dollar As a global Reserve asset doesn't seem So far away that's it for today's video Thanks again for watching I'm Giovanni Your host see you next time
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