Amidst global economic volatility, the US has once again circumvented defaults and raised its debt cap to ensure government operations continue smoothly.
The US debt cap is a legal limit on how much the federal government can borrow to meet its financial obligations, such as pension payments, social welfare programs such as Social Security and Medicare, and benefits on government bonds.
Increase in US debt cap
Raising the debt cap often causes intense debate between Congress and the White House. Negotiations over spending and budgets are usually long-term complicated.
US debt. Source: PGPF
According to data from the Senate Joint Economic Committee (JEC), US national debt was over $36.2 trillion as of April 2025. This marks a significant increase from $22 trillion in March 2019, highlighting the rapid escalation of national debt in recent years.
Historically, it is not uncommon to raise debt caps. According to NPR, since 1960, Congress has acted 78 times to increase the definition of a 29x debt cap under Republicans and 29x the Democrats' presidential definition of a temporary extension or amendment, according to the NPR. This reflects the repetitive need to adjust caps to maintain government functioning, but also raises questions about the long-term sustainability of US fiscal policy.
Under President Donald Trump's administration, bold economic policies have been implemented, including using tariff revenues to serve debt. Trump has imposed a 125% tariff on Chinese products, prompting a retaliatory 84% tariff from China in the US. Imported.
As a result, the Chinese Yuan (CNY) reached its lowest level in 18 years, with the USD/CNY rating reaching 7.394. The original depreciation escalates trade tensions and ripple effects across the cryptocurrency market.
Impact on cryptography
An increase in US debt caps has a multifaceted impact on the crypto market in the short and long term.
Raising the debt cap will help the US avoid defaulting and prevent a potential global financial crisis. This often reassures investors and increases confidence in stocks and traditional financial markets like the US Treasury. As a result, the demand for safe at-home assets like Bitcoin (usually considered a hedge between economic uncertainties) is declining.
Historical trends support this. Bitcoin prices have skyrocketed as investors fear US defaults, such as 2021, during past debt cap crises. However, the rise in the cap eased the pressure, prompting some investors to return capital to traditional assets. This could cause downward price pressure on Bitcoin and other altcoins.
Moreover, weaker ex-people from US policy could drive capital from China to cryptocurrency and provide a positive driving force for the market.
Continuingly increasing the debt cap allows the US government to borrow more to fund spending, often leading to an increase in printing money or issuance of financial obligations. This process expands money supply, fuels inflation, and undermines the value of the US dollar.
Cryptocurrencies, especially Bitcoin, are often considered “inflation hedges” due to their fixed supply and decentralized nature. Investors are increasingly relying on alternative assets to maintain their wealth as the dollar weakens. Bitcoin, often referred to as “digital gold,” has proven its resilience amid past economic instability.
An increase in US debt caps has a complex impact on cryptocurrency. In the short term, as trust in traditional markets increases, it could reduce the demand for safe haven assets like Bitcoin.
But in the long run, hiking of sustained debt caps can promote inflation, weaken the dollar, and place cryptocurrencies as a compelling hedge and alternative asset class.
