Bitcoin Under Pressure: Is the U.S. Government Tanking Markets to help Refinance Its Debt?
A thesis is going the rounds on social media that the current market crash could be intentional, and that the U.S. government hopes to lower bond yields and thereby reduce the cost of refinancing its massive debt. How is Bitcoin coping in this environment?
A staggering amount of debt to be refinanced
A staggering amount of debt (around $34 trillion) needs to be refinanced by the U.S. government. A huge portion of this is financed through Treasury securities consisting of bonds, notes, and bills. These all need to be refinanced as and when they mature.
The big factor that has to be borne in mind as this refinancing occurs, is interest rates. When bond yields are high, the cost of refinancing is also high. However, the inverse is also true.
Therefore, wouldnt the U.S. government have a vested interest in seeing the market come down? The thesis is that as investors flee crashing stocks, they will generally transfer their money into U.S. treasuries, thereby driving up bond prices, and conversely, bringing yields down. These lower yields will then make it a lot cheaper for the U.S. government to refinance its gargantuan debt.
As things stand, the U.S. Treasury has around $8 trillion in short-term debt maturing in 2025 alone. As interest rates have risen since 2022, the cost of servicing the debt has become the biggest line item in the U.S. budget. This expense is forecast to hit $1 trillion in 2026, which will be more than the yearly amounts spent on defence or medicare.
Could the S&P fall to $4,800?
Source: TradingView
The current stock market crash is already quite something. It has surpassed the Japanese carry trade crash of last August, and the more the price falls from here, the more difficult it will be for the bulls to regain the ascending channel.
A measured move for this correction would be down to around $5,500. This isnt that far now from the current price. The 200-day moving average has been lost, and therefore a more serious breakdown might be about to occur. $4,800 was the last major peak for the S&P 500, and this would also coincide with a rising 200-week moving average. Could the market fall this far?
Breakout or another rejection for $BTC?
Source: TradingView
The short-term chart for Bitcoin shows that the price has bounced from the new local low of $76,800. Nevertheless, the price is now up against the local descending trendline, plus some horizontal resistance. The picture is clear. The price either breaks above the trendline and bulls are able to take the price higher, or another rejection occurs. The major bull market support is now not very far below.
A reversal of the downtrend in sight?
Source: TradingView
Zooming further out into the daily chart, attention is drawn to the Relative Strength Index at the bottom. A clear descending channel has formed, with the indicator bouncing around within it. The last touch at the bottom trendline is the lowest descent since August 2023, perhaps this was a bottom. If so, the indicator line is more likely to break out of the top of the channel, possibly signalling a reversal of the downtrend.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
Text source: Crypto Daily™
