Treasury Secretary Janet Yellen recently warned that the U.S. is on track to hit its debt ceiling between January 14 and January 23, aligning with the inauguration of President-elect Donald Trump. In a letter to House Speaker Mike Johnson, Yellen stated that once the debt limit is reached, the Treasury will initiate “extraordinary measures” to manage borrowing.

“I respectfully urge Congress to act to protect the full faith and credit of the United States,” she wrote. Congress had suspended the debt ceiling in June 2023 until January 1, 2025, but with the deadline approaching, urgent action is needed.

The announcement sent shockwaves through the markets, leading to a decline in risk assets. U.S. equities saw a drop, with the S&P 500, Nasdaq 100, and Dow Jones Industrial Average all losing approximately 1%. Bitcoin followed suit, dropping as much as 4% from its high during the day.

Raising the debt ceiling has historically been a bearish signal for Bitcoin. On the five occasions when the debt ceiling was increased, Bitcoin typically underperformed or saw a price drop in the subsequent days.

December has been a tough month for Bitcoin, which is currently down 3% and is on track for its first negative month since August. The timing of the debt ceiling issue coincides with President-elect Donald Trump’s inauguration on January 20, adding an additional layer of political and economic uncertainty.

The U.S. debt ceiling, first set at $45 billion in 1939, has been raised 103 times as government spending continues to outpace revenue. The national debt now exceeds $36.2 trillion, according to Zerohedge.

Bitcoin’s price movements are also following the patterns of previous market cycles. Since the FTX collapse in November 2022, Bitcoin has closely mirrored the trajectory of earlier cycles. Currently, with nearly a 500% return, it is at a similar stage as the two prior cycles, both of which saw significant pullbacks at this point.

Given this historical context, there’s speculation that the U.S. debt ceiling issue and Trump’s inauguration on January 20 could signal a potential bottom for Bitcoin, following the pattern seen in past cycles.