- Main event, leadership changes, market impact, financial shifts, or expert insights.
- Moody’s downgrades U.S. credit rating to Aa1.
- Bitcoin and Ethereum prices drop sharply.
Crypto market reacts to Moody’s downgrading U.S. credit rating from Aaa to Aa1, causing Bitcoin and Ethereum declines.
Moody’s Ratings Service downgraded the United States’ credit rating from ‘Aaa’ to ‘Aa1’ on Friday, May 16, 2025, leading to significant volatility in global cryptocurrency markets.
This event is pivotal as it has caused immediate price fluctuations in the cryptocurrency market, signaling increased uncertainty among investors.
Moody’s Ratings Service downgraded the U.S. credit rating due to the mounting $36 trillion national debt and lack of fiscal reforms. Treasury Secretary Scott Bessent targets a deficit-to-GDP ratio of 3% amid these changes.
Moody’s action has led to increased bond yields, with the 2-year reaching 3.993% and the 10-year at 4.499%. This shift indicates a heightened risk appetite in government debt markets.
Bitcoin fell 2% to approximately $103,014, while Ethereum recorded over a 4% decrease. This response reflects broader concerns affecting risk assets, including cryptocurrencies.
Historically, credit downgrades have spurred market volatility, and further insights can be found in the Kobeissi Letter tweet on Twitter.
In addition, a statement from Moody’s Ratings News Update highlighted the failure of U.S. administrations in addressing fiscal deficits, projecting federal debt could reach 134% of GDP by 2034.
Successive U.S. administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs. — Moody’s Ratings Service, Official Statement
The downgrade’s impact on cryptocurrencies suggests potential for regulatory scrutiny in financial markets. Investors are watching for signs of sustained declines or stabilization amid rising global economic uncertainty.
