Bitcoin ignores Moody’s US debt downgrade, rallies back to $105K after profit-taking sell-off

3 hours ago

Key takeaways:

Bitcoin recovered from its crisp sell-off from $107,000, suggesting it functions arsenic a hedge against uncertainty for investors reacting to Moody’s caller downgrade of US debt.
Moody’s downgraded the US recognition standing to Aa1, citing a $36 trillion indebtedness and rising deficits, causing marketplace turbulence and a spike successful US Treasury yields.
Despite short-term unit from macroeconomic shifts, Bitcoin’s semipermanent outlook remains bullish owed to cautious shorting and a weakening US dollar.

Bitcoin (BTC) terms faced a crisp 4% correction during the Asian trading league connected May 19, tumbling from an “important level” arsenic noted by Glassnode. The information analytics level indicated that Bitcoin’s surge stalled conscionable beneath $106,600, a captious level wherever 31,000 BTC are held. This proviso cluster, formed connected Dec. 16, 2024, reflects steadfast holder conviction, arsenic investors person neither sold nor averaged down contempt terms fluctuations.

Cryptocurrencies, Bitcoin Price, Markets, Price Analysis, Market Analysis

The BTC terms driblet occurred aft macroeconomic headwinds intensified, with a historical downgrade of the US recognition standing by Moody’s and a emergence successful US Treasury yields, raising speculation astir hazard assets specified arsenic Bitcoin’s near-term trajectory.

Moody’s US recognition downgrade spooks markets

After the US markets closed connected May 16, Moody’s Investors Service downgraded the US recognition standing from Aaa to Aa1, marking the archetypal downgrade successful modern history. Moody's cited concerns implicit the US's ballooning $36 trillion indebtedness pile, with national deficits projected to scope 9% of GDP by 2035, up from 6.4% successful 2024.

Interest payments connected US indebtedness are expected to devour 30% of national gross by 2035, a important emergence from 18%. Following akin actions by S&P successful 2011 and Fitch successful 2023, this downgrade underscores the unsustainable fiscal way of the US, rattling capitalist assurance and contributing to marketplace turbulence.

The downgrade besides coincided with a surge successful US Treasury yields, further impacting markets. The 10-year Treasury output opened astatine 5.53% post-downgrade connected May 19, while the 30-year output followed a akin upward trend, presently astatine 4.98%, reflecting capitalist concerns implicit higher borrowing costs for the US government.

The Kobeissi newsletter highlighted that historically, past downgrades led to mixed output reactions—yields fell 35% aft the 2011 S&P downgrade but roseate 23% aft Fitch's 2023 downgrade. This time, the output spike mirrors the 2023 pattern, signaling fears of ostentation and fiscal strain, which apt contributed to Bitcoin's terms correction arsenic investors sought safer assets.

Will short-term symptom displacement to semipermanent summation for Bitcoin?

Bitcoin's terms dump connected May 19 reflects its sensitivity to macroeconomic shifts. Bitcoin could look continued unit successful the abbreviated word arsenic investors pivot to safer assets amid rising uncertainty and borrowing costs.

However, Bitcoin researcher Axel Adler Jr. connected X highlighted a displacement successful marketplace sentiment, noting that traders betting connected terms declines person been “significantly much cautious” successful gathering abbreviated positions during this bull rhythm compared to 2021. This suggests a mostly bullish semipermanent outlook, arsenic bears turn risk-averse.

Historically, Bitcoin has served arsenic a harmless haven during economical turmoil, specified arsenic the COVID-19 crisis, and could payment semipermanent from eroding spot successful fiat systems, particularly with the US fiscal outlook deteriorating.

The US Dollar Index (DXY) is signaling a imaginable diminution beneath $100, reflecting a weakening dollar that has triggered a classical "risk-off" response. This displacement has reignited involvement successful gold, which saw a humble 0.4% increase, though broader marketplace reactions stay subdued. Typically, a weaker dollar bolsters hazard assets similar Bitcoin, arsenic investors question alternate stores of value. Adler Jr said,

“Overall, contempt the prevailing “risk-off” sentiment (typically a headwind for high-volatility assets), Bitcoin whitethorn find itself successful a comparatively stronger presumption successful the existent situation owed to its “digital gold” communicative and the supportive effect of a weaker dollar.”

This nonfiction does not incorporate concern proposal oregon recommendations. Every concern and trading determination involves risk, and readers should behaviour their ain probe erstwhile making a decision.

View source