U.S. Treasury Secretary Janet Yellen warned House Speaker Mike Johnson last Friday in a letter that the United States may reach a new debt ceiling sometime between January 14 and January 23, 2025, coinciding with Trump's inauguration on January 20. Analysts suggest that Bitcoin may 'bottom out' during Trump's inauguration, similar to the previous two cycles. (Background: The U.S. government shutdown crisis has been resolved! Biden signed a 'temporary spending bill,' but Trump’s call to raise the debt ceiling was unsuccessful) (Context: One day until the U.S. government shutdown countdown) Trump advocates for: completely eliminating the federal debt ceiling. The U.S. Congress passed a temporary spending bill for the federal government in mid-January at the last minute to keep the federal government running until March 14, 2025. Although this temporarily avoided a potentially tumultuous government shutdown crisis, Trump's goal of 'completely eliminating the federal debt ceiling' was not achieved, meaning the debt ceiling crisis, which was barely postponed in mid-2023, will resurface in January next year. According to Coindesk, U.S. Treasury Secretary Janet Yellen warned in a letter to Republican House Speaker Mike Johnson last Friday that the U.S. might reach a new debt ceiling sometime between January 14 and January 23, 2025. At that time, the U.S. Treasury will need to take 'extraordinary measures' to cut borrowing to prevent a U.S. debt default. She emphasized: 'I respectfully urge Congress to take action to protect the full faith and credit of the United States.' Further reading: What is the U.S. debt ceiling crisis? Is it scarier than the financial tsunami? Its impact on the global economy. The 'U.S. debt ceiling' is the maximum borrowing limit set by the U.S. for the federal government to fulfill its payment obligations. This limit is currently set at $31.4 trillion. At the end of 2022, the Treasury warned that U.S. debt was approaching the debt ceiling, igniting more than six months of bipartisan struggle. In June 2023, Biden signed a bill extending the effective date of the debt ceiling to January 1, 2025, temporarily avoiding a U.S. government debt default crisis. Currently, U.S. national debt has exceeded $36.2 trillion. Bitcoin falls below $92,000. Just before this letter was announced, risk assets weakened at closing. U.S. stock indices generally declined, with the S&P 500 index, Nasdaq 100 index, and Dow Jones Industrial Average all falling about 1%. Bitcoin dropped 4% from its intraday high. As of the writing on Tuesday, BTC fell to $92,550, a decline of 14.6% from this month's historical high of $108,365, likely marking the first monthly drop since August. Source: OKX. The U.S. is approaching a new debt ceiling in mid to late January; will Bitcoin bottom out? It is noteworthy that Trump's inauguration date of January 20 falls within the period when the Treasury estimates the debt ceiling may be reached. The debt ceiling and Trump's inauguration both increase political and economic uncertainty. Additionally, raising the U.S. debt ceiling has always been a negative signal for Bitcoin. In the past five instances of raising the debt ceiling, Bitcoin has experienced declines or poor performance in the following days. Source: Coindesk. Coindesk pointed out that since the cyclical low during the FTX collapse in November 2022, BTC has maintained a consistent trend with the previous two cycles. The return rate of Bitcoin near the cyclical low is close to 500%, similar to the performance at the same timeframe during previous cycles when the debt ceiling was raised, indicating that 'this is not a good sign for bulls.' This is because both the 2018-2022 and 2015-2018 cycles saw significant declines at the time of raising the debt ceiling, as shown in the red box in the diagram below, suggesting that Bitcoin may see a bottoming event on Trump's inauguration day, January 20. Source: Coindesk. January Black Swan: The U.S. debt ceiling crisis reignites. However, what is more alarming for global markets is the potential black swan event of 'U.S. debt default' in January next year. If the two parties fail to reach a consensus to raise or pause the debt ceiling again, eventually leading to a debt default, it could trigger, as Yellen has repeatedly warned, 'economic and financial collapse' and a recession, undermining the U.S. dollar's status as the world's reserve currency. It is foreseeable that the two parties in the U.S. will make every effort to avoid such a disaster. Trump may also attempt to leverage the Republican majority in the Senate next year to achieve his goal of 'eliminating the debt ceiling.' Related reports: Michael Saylor: U.S. Bitcoin reserves are expected to offset $81 trillion in debt; MicroStrategy's opportunity to include S&P 500; VanEck: If the U.S. establishes a strategic reserve of 1 million Bitcoins, it could reduce debt by 35% by 2050; U.S. think tank: Bitcoin strategic reserves 'cannot solve the U.S. debt crisis'; BTC is not that miraculous... The U.S. Senate passes the 'debt ceiling suspension bill,' allowing borrowing over $31.4 trillion after Biden's signature. 'Is Trump's inauguration the 'Bitcoin lowest point'? Yellen warns that the U.S. debt ceiling dates are January 14-23' This article was first published in BlockTempo (the most influential blockchain news media).

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