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Bitcoin (BTC) nudged $27,000 after the May 19 Wall Street open as the Chair of the United States Federal Reserve delivered comments on policy.

BTC price volatility returns as Powell speaks

Data from Cointelegraph Markets Pro and TradingView followed BTC/USD as it attempted to reclaim the focal level in its short-term trading range.

All eyes were on Fed Chair Jerome Powell on the day, who was speaking at the Thomas Laubach Research Conference in Washington, D.C.

Market nerves had returned the day prior as other Fed officials, along with jobless data, had heightened expectations of interest rate hikes continuing.

“While the financial stability tools helped to calm conditions in the banking sector, developments there, on the other hand, are contributing to tighter credit conditions and are likely to weigh on economic growth, hiring and inflation,” he said.

Bitcoin (BTC) stares at potential losses heading into the third-quarter of 2023 after U.S. lawmakers will likely reach an agreement on raising the debt ceiling.

A $1 trillion liquidity hole ahead

Raising the debt ceiling means the U.S. Treasury could issue new bonds to raise cash to meet its previous obligations.

As a result, the cash pile at the Treasury General Account could increase from $95 billion in May to $550 billion by June and to $600 billion in the three months afterward, according to the department's recent estimates.

Ari Bergmann, the founder of risk management firm Penso Advisors, estimates that the Treasury will cross $1 trillion by the end of Q3, 2023. 

“My bigger concern is that when the debt-limit gets resolved — and I think it will — you are going to have a very, very deep and sudden drain of liquidity,” said Bergmann, adding:

Bitcoin (BTC) traded back below $27,000 on May 19 as analysis flagged large-volume trades pressuring price.

Inflation specter haunts crypto markets

Data from Cointelegraph Markets Pro and TradingView showed BTC/USD hitting lows of $26,380 on Bitstamp.

A modest recovery then took the pair to a range familiar from several days prior, this still in focus prior to the week’s final Wall Street open.

Downside overnight came courtesy of increasing market expectations of an interest rate hike by the United States Federal Reserve in June.

These came thanks to low jobless claims data for the week, with Fed officials adding a hawkish tone.

Bitcoin has been trying to break above the $27,500 resistance for the past week but to no avail. One of the reasons limiting Bitcoin’s (BTC) upside is the risk of an eventual United States default as the government struggles to get the debt limit increase approved in Congress. 

Still, some analysts and investors argue that the U.S. debt ceiling standoff is merely a “show” because, ultimately, additional money will hit the markets.

Notice how MacroJack correlates Bitcoin’s digital scarcity to the next logical step: additional inflationary pressure. The stimulus measures, meaning increasing the government debt limit, might initially sound positive because they avoid default and favor more economic activity. However, the unintended consequences are future budget constraints as the debt interest payment increases.

Bitcoin price increases while gold breaks a 45-day low

Bitcoin’s gains above $27,000 happened while gold traded down 2.5% from May 15 to May 18, reaching its lowest level in 45 days at $1,970. Meanwhile, the U.S. Dollar Index, which measures the currency against a basket of foreign exchanges, reached its highest level in two months on May 18, meaning the U.S. currency gained strength relative to its global peers.

This data should not be interpreted as a vote of confidence in the government’s ability to avoid a shutdown, as the global economy would be negatively impacted in the event of a U.S. debt default. For instance, eurozone members hold $1.54 trillion in U.S. Treasurys, followed by Japan’s $1.1 trillion, China’s $860 billion and the United Kingdom’s $668 billion.

Bitcoin (BTC) has crossed a significant threshold this month — and while it does not involve price, it does involve “millions.”

Data from on-chain analytics firm Glassnode confirms that as of May 18, there are over 1 million addresses that hold at least 1 BTC.

Back: Adoption trend lays path to “hyperbitcoinization”

It was a long time coming and received much attention on social media, and the time is finally here — there are 1 million entities that own a whole Bitcoin.

These “wholecoiners” have been steadily accruing since mid-2021, Glassnode shows, and the upward trend in 1-BTC wallets has seen almost no reversal since.

In 2022, however, the trend accelerated, having started the year with 814,000 wholesalers and finishing it with 978,000 — an increase of 20%.