The Senate approved a bill that  would give the government nearly two months of spending power. This bill is likely to pass the House, resulting in further inflationary pressures in the United States. Bitcoin continues to perform well as inflation concerns remain top of mind for many investors. The SEC approved an ETF that offers indirect exposure to Bitcoin through companies operating in the space.

The Senate Approves an Increase to the Debt Ceiling Despite Inflation Concerns

The Senate approved a bill that would allow the government to increase its debt limit by $480 billion. This bill is expected to pass the Democratic-controlled House before getting final approval from Joe Biden. This increase is estimated to give the government enough funds to cover expenses through early December. Former Treasury Secretary Steven Mnuchin criticized the idea of increasing the debt ceiling, citing concerns about “ongoing inflation.” Mnuchin believes 10-year treasury yields could go as high as 3.5% if irresponsible spending continues. The U.S. added only 194,000 jobs in September, far below the projections of 500,000. However, low unemployment rates, due to people dropping out of the labor force, are likely sufficient to keep the Fed on pace to announce a taper of asset purchases at its November meeting.

Financial Institutions Roll-Out Additional Bitcoin Support

Bitcoin continued its price rally this week, trading around $57,500 at the time of writing. Wyoming Senator Cynthia Lummis disclosed that she purchased between $50,001 and $100,000 worth of Bitcoin on August 18th. Wyoming is trying to become a cryptocurrency capital of the United States, with favorable taxation and regulation for Bitcoin-focused companies. U.S. Bank launched its cryptocurrency custody service on October 5th. The service will help fund managers store Bitcoin private keys and other select cryptocurrencies. The bank noted that its “clients are getting very serious about the potential of cryptocurrency as a diversified asset class.” A report from JPMorgan stated that “Bitcoin’s allure as an inflation hedge” is leading many investors to replace gold with Bitcoin in their portfolios.

Regulators Are Slowly Coming Around to Bitcoin Products

The SEC approved The Volt Crypto Industry Revolution and Tech ETF on October 5. This ETF is an actively managed fund that seeks exposure to companies investing and operating in the Bitcoin space, including mining, lending, and direct Bitcoin ownership. Volt Equity noted that MicroStrategy, Marathon Digital Holdings, and Bitfarms were some of the primary targets for the fund. However, the SEC delayed rulings on most  direct Bitcoin ETFs until late November and early December. The FDIC is exploring the idea of insuring stablecoins holders up to $250,000, in case the issuing company is unable to service redemptions. This decision could add significant trust and liquidity to cryptocurrency markets.

Market Recap

The Senate’s passage of a debt ceiling increase makes it highly likely that the bill will be enacted. Although expected, this development reinforces the government’s loose monetary policies and reignites investors’ concerns about long-term inflation. Bitcoin’s price has continued to perform well during a rally, which is presumably related to global inflation considerations. The U.S. government is making small steps to facilitate Bitcoin adoption. FDIC insurance for stablecoins can make cryptocurrency markets more liquid by increasing the trust of dollar-pegged assets, which are commonly used as onramps to cryptocurrency markets.