Source: Cointelegraph.com NewsKey takeaways:<\/p>\n
Bitcoin recovered from its sharp sell-off from $107,000, suggesting it functions as a hedge against uncertainty for investors reacting to Moody\u2019s recent downgrade of US debt.
\nMoody\u2019s downgraded the US credit rating to Aa1, citing a $36 trillion debt and rising deficits, causing market turbulence and a spike in US Treasury yields.
\nDespite short-term pressure from macroeconomic shifts, Bitcoin\u2019s long-term outlook remains bullish due to cautious shorting and a weakening US dollar.<\/p>\n
Bitcoin (BTC) price faced a sharp 4% correction during the Asian trading session on May 19, tumbling from an \u201cimportant level\u201d as noted by Glassnode. The data analytics platform indicated that Bitcoin\u2019s surge stalled just below $106,600, a critical level where 31,000 BTC are held. This supply cluster, formed on Dec. 16, 2024, reflects firm holder conviction, as investors have neither sold nor averaged down despite price fluctuations. Source: Cointelegraph.com NewsKey takeaways: Bitcoin recovered from its sharp sell-off from $107,000, suggesting it functions as a hedge against uncertainty for investors reacting to Moody\u2019s recent downgrade of US debt.… <\/p>\n","protected":false},"author":0,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[5],"tags":[],"_links":{"self":[{"href":"http:\/\/cryptospotters.net\/index.php?rest_route=\/wp\/v2\/posts\/129561"}],"collection":[{"href":"http:\/\/cryptospotters.net\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/cryptospotters.net\/index.php?rest_route=\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"http:\/\/cryptospotters.net\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=129561"}],"version-history":[{"count":0,"href":"http:\/\/cryptospotters.net\/index.php?rest_route=\/wp\/v2\/posts\/129561\/revisions"}],"wp:attachment":[{"href":"http:\/\/cryptospotters.net\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=129561"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/cryptospotters.net\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=129561"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/cryptospotters.net\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=129561"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\nBitcoin price cost basis chart. Source: GlassnodeThe BTC price drop occurred after macroeconomic headwinds intensified, with a historic downgrade of the US credit rating by Moody\u2019s and a rise in US Treasury yields, raising speculation around risk assets such as Bitcoin\u2019s near-term trajectory.
\nMoody\u2019s US credit downgrade spooks markets
\nAfter the US markets closed on May 16, Moody\u2019s Investors Service downgraded the US credit rating from Aaa to Aa1, marking the first downgrade in modern history. Moody’s cited concerns over the US’s ballooning $36 trillion debt pile, with federal deficits projected to reach 9% of GDP by 2035, up from 6.4% in 2024.
\nInterest payments on US debt are expected to consume 30% of federal revenue by 2035, a significant rise from 18%. Following similar actions by S&P in 2011 and Fitch in 2023, this downgrade underscores the unsustainable fiscal path of the US, rattling investor confidence and contributing to market turbulence.
\nUS 30Y treasury yields reached its highest level since Oct 2023. Source: Cointelegraph\/TradingViewThe downgrade also coincided with a surge in US Treasury yields, further impacting markets. The 10-year Treasury yield opened at 5.53% post-downgrade on May 19,\u00a0while the 30-year yield followed a similar upward trend, currently at 4.98%, reflecting investor concerns over higher borrowing costs for the US government.\u00a0
\nThe Kobeissi newsletter highlighted that historically, past downgrades led to mixed yield reactions\u2014yields fell 35% after the 2011 S&P downgrade but rose 23% after Fitch’s 2023 downgrade. This time, the yield spike mirrors the 2023 pattern, signaling fears of inflation and fiscal strain, which likely contributed to Bitcoin’s price correction as investors sought safer assets.
\nRelated:\u00a0Bitcoin bulls should ‘be careful with longs’ as BTC price risks $100K breakdown
\nWill short-term pain shift to long-term gain for Bitcoin?
\nBitcoin’s price dump on May 19 reflects its sensitivity to macroeconomic shifts. Bitcoin could face continued pressure in the short term as investors pivot to safer assets amid rising uncertainty and borrowing costs.
\nHowever, Bitcoin researcher Axel Adler Jr. on X highlighted a shift in market sentiment, noting that traders betting on price declines have been \u201csignificantly more cautious\u201d in building short positions during this bull cycle compared to 2021. This suggests a generally bullish long-term outlook, as bears grow risk-averse.
\nBitcoin Advanced Short\/Long signals. Source: X.comHistorically, Bitcoin has served as a safe haven during economic turmoil, such as the COVID-19 crisis, and could benefit long-term from eroding trust in fiat systems, especially with the US fiscal outlook deteriorating.
\nThe US Dollar Index (DXY) is signaling a potential decline below $100, reflecting a weakening dollar that has triggered a classic “risk-off” response. This shift has reignited interest in gold, which saw a modest 0.4% increase, though broader market reactions remain subdued. Typically, a weaker dollar bolsters risk assets like Bitcoin, as investors seek alternative stores of value. Adler Jr said,
\n\u201cOverall, despite the prevailing \u201crisk-off\u201d sentiment (typically a headwind for high-volatility assets), Bitcoin may find itself in a relatively stronger position in the current environment due to its \u201cdigital gold\u201d narrative and the supportive effect of a weaker dollar.\u201d
\nRelated:\u00a0$107K fakeout or new all-time highs? 5 things to know in Bitcoin this week
\nThis article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.Read More<\/a><\/p>","protected":false},"excerpt":{"rendered":"