US Credit Rating Downgraded for the First Time - Bitcoin (BTC) Price Surges 3.5%

17th May 2025 – (New York) Moody’s Investors Service has downgraded the United States’ credit rating for the first time in history, citing escalating concerns over the nation’s rising debt and a projection that interest payments could consume 30% of government revenues by 2035.

Moody's Investors Service has downgraded the United States' credit rating for the first time in history, as reported by The Kobeissi Letter. The downgrade, which was announced on 17th May, 2025, and comes amid escalating concerns over the nation's rising debt.

According to Moody's projections, interest payments on U.S. debt could reach 30% of government revenues by 2035, setting the stage for a potential crisis in government finances.

The rating agency's decision to lower the U.S. credit rating to Aaa from Aa1 follows a series of warnings from the International Monetary Fund (IMF) regarding the risks of U.S. debt.

The news triggered immediate volatility across traditional financial markets, with the S&P 500 falling 1.2% and the Dow Jones Industrial Average dropping 1.5% by the afternoon of 17th May. Cryptocurrency markets, by contrast, saw a surge in activity. Bitcoin (BTC) rose 3.5% to $68,200 by midday, while trading volumes for BTC/USD on Binance spiked by 18% within six hours.

This surge in activity coincided with a 12% increase in the number of Bitcoin addresses holding over 1 BTC, as per Glassnode's on-chain data, suggesting accumulation by high-net-worth investors.

The downgrade also coincided with a broader risk-off sentiment in equity markets, as indicated by a 14% spike in the VIX to 22.5. This volatility drove funds into decentralized assets like Bitcoin and Ethereum.

Bitcoin's price action showed strength, with traders now focused on key resistance at $69,000. If this level is breached, the next target for bulls is $70,000, a mark that has not been touched since November 2022.

Technical analysis of Bitcoin on the 4-hour chart revealed that the Relative Strength Index (RSI) had climbed to 62, signaling bullish momentum without entering overbought territory. The Moving Average Convergence Divergence (MACD) also indicated a bullish crossover at 2pm EST on 17th May, further reinforcing the potential for further gains.

Crypto-related equities also reflected this trend, with Coinbase (COIN) shares rising 2.8% to $225.40 by early afternoon.

Moreover, Bitcoin-focused ETFs, such as the Bitwise Bitcoin ETF, saw inflows of $15 million by 4pm EST, highlighting growing institutional interest in the cryptocurrency space.

The downgrade's impact extended beyond cryptocurrencies, with stablecoin demand and dollar-pegged assets likely to see fluctuations as the market adjusts to heightened economic uncertainty. The 10-year US Treasury yield rose 8 basis points to 4.3%, further supporting the case for Bitcoin as a hedge.

For traders, this event presents both opportunities and risks. Bitcoin faces key resistance at $69,000, while Ethereum continues to hold support around $3,100.

Institutional flows into crypto assets may accelerate if equity market volatility persists, as evidenced by a 14% spike in the VIX to 22.5 and a 5% rise in Bitcoin's implied volatility on Deribit.