Crypto: Bitcoin and ethereum prices rise after US debt ceiling deal announcement

Brian McGleenon
bitcoin WASHINGTON, DC - MAY 28: U.S. President Joe Biden delivers remarks on a deal struck yesterday with House Speaker Kevin McCarthy to raise the national debt limit in the Roosevelt Room of the White House on May 28, 2023 in Washington, DC. The deal, which lifts the debt limit for two years while restricting government spending over the same period, staves off the U.S. defaulting on its debt for the first time in its history. (Photo by Anna Rose Layden/Getty Images)
Bitcoin rallied as legislation to address the US debt ceiling and avoid a potential default could eliminate a proposed tax on cryptocurrency miners' energy consumption. Photo: Anna Rose Layden/Getty (Anna Rose Layden via Getty Images)

Bitcoin (BTC-USD) neared the $28,000 mark on Tuesday, rallying on news that a proposed 30% tax on crypto mining in the US could be shelved as part of a bipartisan debt ceiling deal.

Bitcoin was trading at $27,810 (£22,175) on Tuesday, up 1.8%.

The global cryptocurrency market cap stood at $1.21tn, down 0.5%, according to Coingecko data.

Since November 2022, bitcoin reserves have on cryptocurrency exchanges have decreased steadily, suggesting a drying up of supply.

Read more: Crypto live prices

Analysts who adhere to the four-year cycle theory suggest that this is part of the pre-halving accumulation period for bitcoin and the crypto market.

Ethereum (ETH-USD) stood at £1,902, a rise of 2.5%.

Ethereum balances on exchanges have also fallen to 17.8 million ETH — a five-year low.

The supply of Ethereum has seen a decrease of more than 80,000 ETH since the "Merge" update, which has set the annual deflation rate at 0.11%.

Crypto mining tax could be averted in proposed US debt ceiling deal

Legislation to address the US debt ceiling and avoid a potential default could eliminate a proposed tax on cryptocurrency miners' energy consumption.

A draft bill, issued by US lawmakers on Sunday, proposed a two-year debt ceiling suspension, without including president Biden's desired tax hikes for corporations and wealthy individuals.

This draft reportedly blocks "proposed taxes," such as a 30% tax on electricity used by crypto miners from Biden's FY2024 budget.

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Despite the tentative agreement serving as a compromise to avoid a debt default, the bill still requires approval from a divided House of Representatives, with the vote expected on Wednesday 31 May, ahead of a potential June default deadline.

Asset managers increase their bitcoin long positions

A Commitment of Traders (COT) report indicates that asset managers have halted their two-week reduction in bitcoin open long positions, instead adding 24 contracts.

Adding to the bullish signals, the report showed that asset managers have also lowered their bitcoin short positions by 194 contracts.

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