 It's just a matter of days before the United States government runs out of money. That's right, the largest economy in the world has hit its debt ceiling of $31.4 trillion, preventing it from borrowing any more cash. As a result, the US risks a default if its debt ceiling is not raised by June 1st. US Treasury Secretary Janet Yellen said the risk is real and the consequences would be catastrophic for the US and the global economy. But how likely is the default scenario? Are we really on the brink of disaster? And how is this crisis affecting global markets and your crypto portfolio? We answer all these questions in this video. Before we get started, don't forget to hit the like button and subscribe to our channel. Also, turn on the notification bell to keep you up to date on the latest videos. I'm Giovanni, your host and this is a Cointelegraph Report. First of all, what is the debt ceiling? The debt ceiling is the upper limit on the amount of money the US government can borrow. Like most governments, the US spends more money than it takes in. That's why it issues Treasury bonds. A Treasury bond represents a loan that investors make to the US government, which will be paid back with interest within a specific time. By borrowing money through Treasury bonds, the government can pay for various expenses, from healthcare to social security. US debt has been skyrocketing in the last few decades, and back in January it hit the current ceiling of $31.4 trillion. Janet Yellen, the US Treasury Secretary, said the government would run out of money as soon as June 1st if the debt ceiling wasn't raised before that date. That would mean a default, a situation where the US Treasury cannot make payments to investors holding the government bonds. To avoid that scenario, an agreement must be reached between Democrats and Republicans in Congress. Republicans are demanding spending cuts in several sectors as a condition to lift the ceiling, while Democrats want the ceiling lifted without any precondition. The negotiations are still ongoing and no agreement has been reached so far. So what will happen if an agreement won't be reached in time and the US defaults on its debt? There are two possible scenarios. The first one is the classic default. The government stops paying debt obligations to bondholders with catastrophic effect. The stock market would crash, millions of jobs would be lost, and the economy would likely plunge into a recession. Obviously, a US default will have devastating implications for the global financial system, which is largely built around trust in the US economy. A second milder scenario is the technical default. In such a scenario, the government delays some of the payments for a more or less extended period of time. While milder than a classic default, this scenario will still cause major economic distress. Something similar happened in 1979 when the Treasury had to delay payments to individual investors due to a technical glitch. That small delay resulted in a spike in Treasury yields, costing the government billions of dollars. So what are the chances that the US will actually miss the deadline and default on its debt? Well, the risk may never have been so high. According to a Bloomberg survey, investors believe the risks of default are now higher than they were in 2011. Back then, the US government was very close to defaulting on its debt. That resulted in a major market crash, and the US credit rating was downgraded for the first time from AAA to AA+. The lower the credit rating a country has, the riskier it is to invest in its debt, and the harder it is for that country to raise money by issuing bonds. To avoid an even worse scenario this time, lawmakers will probably file an agreement, perhaps at the very last minute. At least that is what markets seem to be expecting at the moment. Now, what does this debt ceiling crisis mean for crypto and the broader market? Marcel Penchmann, analyst and writer at Cointelegraph gave us his predictions. If the debt ceiling is not increased, I think initially it's going to be really negative for risk markets. And that includes stocks, that includes Bitcoin, that includes commodities, I think everything will go down in price. In the first moment, there will be panic. And that's not all. A potential US default would be particularly dangerous for dollar-backed stablecoins. Many of these stablecoins reserves are backed by US Treasury bills, which means they could de-peg in case of a default. To avoid that scenario, the issuer of USDC Circle has recently rebalanced its reserves. But here is the bullish take. According to a recent Bloomberg poll, Bitcoin would be one of the top three assets retail investors would buy to protect their wealth in case of a US default. That means, regardless of whether the default will happen or not, Bitcoin is increasingly seen as a safe haven against a major collapse of the financial system. Even safer than the US dollar and other major fiat currencies. That is not surprising. The dollar's decline as a global reserve currency is already underway, and it would inevitably accelerate in case of a default. We'll make another video about the de-dollarization soon, so stay tuned. Like the recent banking crisis, a potential US default highlights the need for an alternative to the traditional financial system, which is heavily dependent on the arbitrariness of US politics. People have to look elsewhere to part their money. They will not trust banks. They will not be buying treasures. So they will have to look for alternative assets. And I think that's the moment when gold and cryptocurrencies do the Bitcoin will benefit. To conclude, an asset like Bitcoin, which is outside the control of governments and with a limited supply, becomes highly attractive in situations like this. And a future where it will replace at least in part the US dollar as a global reserve asset doesn't seem so far away. That's it for today's video. Thanks again for watching. I'm Giovanni, your host. See you next time.