US Senate Approves Debt Limit Suspension, Market May Be Volatile In The Near Term

Key Points:

• The US Senate eventually approved bipartisan legislation to increase the US debt limit from $31.4 trillion, thereby avoiding a default.
• The measure was approved by a vote of 63-36 in the Senate.
• Even as the United States escapes a possible default, the market remains cautious.

The US Senate on Thursday enacted bipartisan legislation endorsed by President Joe Biden that raises the government’s $31.4 trillion debt limit, preventing a first-ever default.

The Senate voted 63-36 to adopt the package approved by the House of Representatives on Wednesday, as legislators rushed against the clock after months of bitter wrangling between Democrats and Republicans.

Senator Chuck Schumer, the Senate Majority Leader, stated:

“We are avoiding default tonight.”

President Joseph Biden also stated:

“This bipartisan agreement is a big win for our economy and the American people.”

Biden said he would make another remark at 7 p.m. EDT today.

Despite agreeing to increase the debt limit, Senate Republican Leader Mitch McConnell noted:

“In the coming months, Senate Republicans will continue working to provide for the common defense and control Washington Democrats’ reckless spending.”

Markets responded favorably as the US dodged a possible default, with the S&P 500 rising 0.99% on Thursday and finishing at 4,221 levels. A surge in technology firms propelled the Nasdaq 100 further higher with a 1.3% gain.

Similarly, Bitcoin (BTC) and the larger cryptocurrency market have followed suit, rising more than 1%. Following today’s price increase, Bitcoin has reclaimed the $27,000 mark, while Ethereum (ETH) has approached $1,900.

Yet, liquidity set aside for further issuance of new US debt may cause tightness in the US stock market and cryptocurrencies.

Other cryptocurrencies have also benefited, with Litecoin (LTC) topping the market by more than 4% due to high on-chain volume, with the Litecoin halving looming shortly in the next August.

Republicans had resisted any debt ceiling hike unless they agreed to some broad-based expenditure cutbacks, which they said would start tackling the nation’s fast-rising debt. Instead, Biden advocated for more taxes on the affluent and companies to help solve the nation’s mounting debt. Republicans refused to contemplate any tax increases.

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Harold

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