Bitcoin (BTC) price rallies above $27,000 as investors weigh debt ceiling debate and liquidity concerns

Bitcoin (BTC) started the US trading week with gains, rallying to above $27,000 from a low of $25,800 late Friday.

According to data from CoinDesk, the largest cryptocurrency by market cap recently traded around $27,350, up about 1.6% over the past 24 hours. After falling below $26,000 on Friday, Bitcoin stayed below $27,000 until late Sunday.

Edward Moya, senior market analyst at forex market maker Oanda, suggested in a note on Monday that the upcoming debt ceiling talks “will tell us a lot if investors believe Bitcoin can be more of a safe haven asset despite all the regulatory uncertainties.”

“Bitcoin appears poised to remain range bound, but if risk aversion triggers a moment of de-risking, selling pressure could extend below last week’s low,” Moya wrote.

Ether (ETH), the second largest cryptocurrency by market cap, is up more than 1% on Monday afternoon to settle around $1,830. Among other digital assets, LDO, the governance token for liquid staking platform Lido, is up 11% to trade at $2.15, while indexing protocol The Graph’s GRT token is up more than 12% and at traded at $0.12.

The CoinDesk Market Index (CMI), which measures the overall performance of the crypto market, was up about 1.8% on the day.

Investors have weighed the low liquidity of crypto markets of late, with market makers Jane Street and Jump Crypto pulling out of crypto trading in the US last week due to regulatory uncertainty. Crypto data firm Kaiko’s report on Monday showed that BTC’s market depth of 1% — a metric measuring liquidity conditions — has fallen 4% over the past month, while ETH’s has fallen 2%. Altcoin liquidity suffered even worse, falling around 17% on a monthly basis.

“Due to the bad state of the stock market, institutional and professional investors are left without access to the excess liquidity they would normally allocate to invest in the crypto market,” Sheraz Ahmed, managing partner at blockchain consulting firm Storm Partners, told CoinDesk.

Stock markets turned green on Monday, with the S&P 500 closing up 0.3% and the tech-heavy Nasdaq gaining nearly 0.7%. The Dow Jones Industrial Average (DJIA) rose 0.1%.

In bond markets, the 2-year Treasury yield was little changed at 4.00% on Monday, while the 10-year Treasury yield rose 3 basis points to 3.50%. Greg Cipolaro, global research director at bitcoin-focused investment firm NYDIG, pointed out in a research note on Friday that yield curve inversions similar to the current one indicated a recession in the next 12 months in most cases.

Investors across the board will be watching multiple economic data this week for signs of a slowdown, including monthly US retail sales and housing data.

“Recessions are inevitable in the business cycle and while predicting them is no easy task, the response of markets and asset prices is likely to be determined by the fiscal and monetary response to the slowdown,” Cipolaro wrote. “Risk assets are already far from their highs, so there’s reason to believe that a recession might not be as damaging to financial markets as we’ve already undergone a significant correction,” he added.

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