If both political parties suffer from a bout of insanity and refuse to agree on the new debt limit, bitcoin's value will plummet. It's a pure speculative commodity (not currency) that has no impact upon 99.999% of the world's population. Ask a villager in India whether they would prefer a bitcoin or gram of gold. Ask a Chinese businessman the same question. I bet a Greek factory worker would give the very same answer.
General question to the thread: Is this true? Why would bitcoin's value plummet? Shouldn't it go "up"?
I believe BTCs should go up, since everybody will try to get out of the dollar. However if the dept ceiling is not lifted we are in completely uncharted territory, so I may be wrong. For example, if people still believe in the dollar but there is a liquidity crisis, people will need to get cash to buy their groceries and therefore they would be forced to sell their BTCs at any rate that they could get.
Secondly, well, I don't understand enough to know what will happen to the other world currencies if USA defaults, beyond the "serious global implications" suggested by lots of middle-aged men with very serious faces...
I am certainly not an expert economist, however I tried to understand what could happen in such an event. And based on what I did understand, the US government has several options how to react. It could serve its dept, refusing to pay other bills. Then teachers, policemen and Northrup Grumman are in trouble which will in turn put shopkeepers and Northrup Grumman employees into jeopardy. They would then need to sell their bitcoins (and their other assets) to pay their bills and therefore this is a deflationary scenario (and the value of bitcoins will go down).
If the government instead chooses to default on its dept, then first of all the banks and insurance companies are in trouble. Especially since the US a currently rated AAA and therefore they do not need to monitor their exposure to US dept as closely as (for example) their exposure to Greek dept. Additionally they probably have to pay the CDS insurance for US bonds. This leads to a situation were first of all banks can not trust each other and therefore we get a 2008 scenario. But unlike 2008 the US goverment has just defaulted and can not bail out the banks! So some banks will go bankrupt. Then the other banks need to write off their dept too, leading to other bankruptcies. So the banks can not give as much credit to entrepreneurs, who can not hire anyone and therefore again more people need to convert BTCs to dollars.
However the US dollar is also the global reserve currency, and would likely loose this status. Then people will no longer need to buy dollar in turn to purchase oil and additionally they would stop investing in US stocks. So capital flows out of the dollar and the dollar gets cheaper compared to other currencies. The question is essentially, do BTCs behave like a foreign currency, then they would go up, or do they behave like a local commodity, then they would go down.
Since the effects act on different timescales, I believe that it will be a rather wild ride. First the value of bitcoins would go up, since the withdraw of capital effects are faster than the deflationary effects, then they will go down as the deflationary effects become stronger at some point and in the end bitcoins will be higher since the trust in the monetary system will be weakened.