US Stocks Fall As Federal Reserve, Congress Divisions Weigh on Market
TEHRAN (Tasnim) – US stocks experienced a decline on Wednesday as investors assessed the contrasting stances of the Federal Reserve and Congress, which hold significant implications for the markets.
Minutes from the Fed's recent meeting in early May revealed a division among Fed presidents regarding the decision to raise interest rates at the upcoming June policy meeting or to signal a pause in further rate hikes, allowing time to settle after the regional banking crisis earlier this spring, Yahoo Finance reported.
Simultaneously, concerns are mounting among investors regarding a potential US debt default, as President Joe Biden and House Speaker Kevin McCarthy remain deadlocked in negotiations to raise the country's borrowing limit.
While both leaders have reassured that a debt default will not occur, they continue to struggle to reach an agreement on concessions that would pave the way for a deal.
Treasury Secretary Janet Yellen reiterated to Congress on Wednesday that the US government may exhaust its funds to pay bills as early as June 1, leaving lawmakers with just one week to strike a deal.
Bitcoin and crypto come under selling pressure amid the ongoing debt ceiling stalemate
During the Qatar Economic Forum, Blockchain.com Chief Executive Peter Smith warned that a US government default would initially have a negative impact on the cryptocurrency market but could lead to a rebound afterward. He stated, "On a long horizon, these are probably good for crypto ... If the US government defaults, we'll probably see a quick pull-back and a very strong push upward in the crypto market."
Fitch Ratings placed the United States AAA credit rating on negative watch due to uncertainties surrounding Congress negotiations on raising the debt ceiling. As investors sought a breakthrough in the talks, the crypto market experienced minor losses over the past day.
Bitcoin, the world's largest cryptocurrency, faced significant selling pressure due to concerns about the US debt ceiling and other market uncertainties. Currently, BTC is trading 2% lower at $26,197, with a market cap of $508 billion.
The recent dip in Bitcoin's price is significant, as it has dropped below the crucial support level of $26,500. This decline occurs amidst the ongoing debt ceiling stalemate, as well as concerns about inflation and crypto regulations.
With the debt ceiling deadline approaching in early June, the division between Fed executives and US lawmakers over raising the debt ceiling could potentially lead the US toward a default. Edward Moya, senior market analyst for foreign exchange market maker Oanda, commented, "The recent selling pressure in Bitcoin shows that the signs are clearly not encouraging for Bitcoin bulls. Bitcoin has been breaking under crucial support levels, which hints that there's more pain in sight."
Altcoins have also faced selling pressure, with Ethereum's price dropping by 2.40% and falling below $1,800 levels on Wednesday, May 24.
In light of the extensive regulatory crackdown by US authorities in recent months, players in the local crypto industry are considering relocating their operations out of the country. Major crypto exchanges like Coinbase and Kraken are exploring other crypto-friendly jurisdictions to continue serving their customers.
Coinbase has issued a threat to move its operations out of the US if regulatory clarity is not provided promptly. The lack of regulatory transparency has significantly impacted the industry.
