First Mover Asia: Bitcoin Holding Pattern Continues as Lawmakers' Make Progress in Debt Limit Negotiations

Good morning.

Here’s what’s happening:

Prices: Bitcoin hovered near $26.5K for much of Thursday as investors shrugged over unexpectedly strong jobs and productivity data.Insights: Nvidia GPUs were useful in AI because they can process large amounts of data; now they seem key to the company's growth because they are also well-suited AI.

Prices : Bitcoin's Debt Limit Holding Pattern

Will the U.S. be able to pay its bills after June 1?

The question seemed foremost on the minds of crypto investors who continued to track negotiations about the U.S. debt ceiling. House lawmakers reported progress in the discussions, although whether they and the Biden Administration reach an agreement remains uncertain.

They kept bitcoin hovering between $26,400 and $26,500 for large swathes of Thursday, a little above where it spent the previous day but below the tight range it held for the previous 12 days in May. The largest crypto by market cap was recently up about 0.5%. Ether, the second largest crypto in market value, was similarly range-bound, changing hands just above $1,800, up roughly 0.4%.

Major cryptos were mixed after edging up slightly earlier in the day. The CoinDesk Market Index, a measure of crypto markets performance, was up 0.4%.

“For now, we are stuck in a holding pattern of sorts until we see a resolution to this debt-ceiling crisis," Dave Weisberger, the CEO and co-founder of CoinRoutes, an algorithmic-trading platform for cryptocurrencies.

Crypto markets' Thursday stasis came even amid the release of unexpectedly positive, weekly unemployment figures and GDP – the type of data that has regularly sent markets spiraling. The Labor Department announced that 229,000 Americans filed for unemployment benefits last week, well below the anticipated 245,000, and the U.S. economy increased 1.3%, the third consecutive quarter of growth. Those figures failed to stir equity markets, although a strong forecast by graphics-chip giant Nvidia based on the surging needs of artificial technology seemed to send tech stocks rising as the tech-focused Nasdaq Composite surged 1.7%.

Weisberger, a TradFi vet who worked for Morgan Stanley earlier in his career, sees three possible paths in the debt ceiling debate, each with its own outcome for crypto.

The Biden Administration halts negotiations to pursue its own actions and spending increases, which would be "wildly bullish for Bitcoin in the long run," Weisberger wrote.

A lengthy government shutdown "and/or technical default" sends interest rates spiraling and BTC drops "in the short-term, along with other assets," but then rebounds. "Bitcoin is an asset that does well when confidence in institutions is low, and such confidence in a default-like scenario would certainly drop further," he wrote.

Or in the most likely result, the U.S. House and administration reach an agreement and "this period of uncertainty and volatility would come to an end," sending bitcoin higher, albeit only if the U.S. central bank pauses rate hikes.

Weisberger noted that the recent lull in trading volumes, although he added that data suggests "that we are in an accumulation phase, where the buyers are relatively passive."

"Tether-denominated trading for BTC, however, is stronger and the liquidity has grown relative to USD-denominated pairs, suggesting that both volumes and liquidity are higher overseas," he wrote.