TL;DR Since its creation from the last financial crisis crypto faces its biggest test yet with a bleak economic outlook and US government debt ceiling negotiations. These two events could result in a massive liquidity crash as fiat is needed to pay everyday expenses. While the US is highly unlikely to default the damage is being done right now to the markets.
It is safe to say that markets across the board are stuck in a rut as House Speaker Kevin McCarthy and President Joe Biden continue to negotiate a deal to raise the debt limit. Since Bitcoin's inception, crypto has been pitched as an alternative monetary system free of third parties and has been highly successful. However, the economic conditions resulting from these debt ceiling negotiations are not only uncommon but are now reaching a point not seen in recent history.
The biggest issue I have seen crypto run into is something I think many of us should understand and not be surprised by. Crypto still lacks a lot of commonplace utility, especially in typical everyday roles. When you look at the basics like having to pay a credit card bill, utility bill, or mortgage payment there really is not an easy clear-cut way to do this. While different protocols and attempts have been made, you cannot open up your Chase Bank account and pay off your bill with crypto.
Due to this issue of economic uncertainty and people needing to be able to go to the grocery store for food any and all assets that people have are on the chopping block to be sold to raise the cash. The result is not only "speculative" investments like crypto being ditched for fiat but even the biggest names in the stock market facing increasing pressure this week.
Now do I think the US will default? It is extremely unlikely however damage is already being done right now. With each day that passes every interview by either side a deeper hole is being dug for the markets to try and claw their way out of.
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