For the First Time in More Than a Century, Moody's Downgraded the US Government's Credit Rating

For the first time in more than a century, Moody's downgraded the US government's credit rating. The agency reduced its Aaa rating to Aa1, and this was a result of the country's

For the first time in more than a century, Moody’s downgraded the US government’s credit rating. The agency reduced its Aaa rating to Aa1, and this was a result of the country’s piling debt and the political deadlock. US Treasury yields increased, and equity and cryptocurrency prices fell right after the news got out. The change in the market situation makes it difficult to predict the future of Bitcoin as the market continues to take into consideration issues of risk and safety.

The first reaction from the market was to Treasury yields to the steep rate hikes. The 10-year US government bond yield, initially triggered by the rating downgrade, surged by nearly 10 basis points (bp) and came to 4.54%, while the 30-year US yield vaulted to 5.01%.

These increased yields indeed pull the curve to a steeper configuration and also negatively affect risk assets, such as Bitcoin. However, the cut in the credit rating also weakened the status of the US dollar as a safe haven, and so it was instrumental in pressuring the greenback to move lower, reducing the rates.

Furthermore, the risk‑off sentiment was widespread and quickly spread through all markets. As stocks were selling off, not only the equities market but also the Bitcoin market plummeted. Bitcoin was hit with over a 4.5% decline on the day of the credit rating cut, further displaying its short‑term rapport with the bear‑run stocks. This immediately caused the speculators who thought Bitcoin was a risk asset to instantly be in a downside zone.

It was Maleny that also highlighted the historical occasion of the downgrade of Moody’s to the United States credit. It is the first time that the rating agency has cut the US government’s credit rating after almost 100 years. The decision is because of the increasing US public debt, which is now at 36 trillion dollars, and ongoing worries about governance. This description of the situation intensifies the risk narrative, which could, in turn, drive much deeper Bitcoin price falls if it also happens in the stock market.

In the coming days, the most impactful events will continue to be changes in US fiscal policy and central bank decisions. If the government sends a signal about its intention to resort to drastic monetary measures to support the economy after the recession, Bitcoin might gain an upper hand through lower real yields.

Conversely, the market will have to wait and see the development of these indicators as they monitor the crypto market, and signals from the government, for any indication of fiscal tightening or persistent yield pressure, which might be a case of longer weakness in the cryptocurrency, or not.

The Moody’s downgrade has definitely made things difficult for Bitcoin. In the near future, there is a possibility that a rise in bond yields and general risk aversion will be obstacles to deal with for prices.

The long run scenario could include the US dollar’s downfall and the country’s credit worries, which would lead to a positive outlook on Bitcoin. Investors’ attention will be captured by yield movements, dollar fluctuations, and the stance of the authorities, as these are the factors to consider in marking Bitcoin’s likely trajectory.