New challenges for Bitcoin after US debt deal, says Citigroup

Just when markets appear to be moving past the months-long drama around the US debt ceiling, holders of risky assets such as cryptocurrencies are likely facing a fresh challenge while the Treasury looks to rebuild its depleted cash balance with an estimated $1 trillion Treasury-bill deluge.

"The impending reserve drawdown, due to the [Treasury General Account] rebuild, may prove to be a headwind," Citi Research strategists including Alex Saunders wrote in a note.


Citi analyzed the performance of risky assets during drawdowns and found that they were vulnerable to higher volatility and weaker returns. As such, the near-term outlook doesn't seem too rosy for Bitcoin and Ether. "Both coins average negative returns in these scenarios, and BTC has significantly underperformed in the median case," the strategists wrote Thursday.