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Moody’s Downgrades US, Crypto Reacts Mostly Positive as BTC Reaches $106k
- Moody’s lowered the US credit rating from Aaa to Aa1 last Friday, citing continuous fiscal deficits and rising government debt over more than a decade.
- President Trump’s spokesman Steven Cheung strongly criticised the downgrade, claiming that Moody’s Analytics economist Mark Zandi’s analysis shouldn’t be taken seriously.
- Despite the downgrade, Moody’s acknowledged America’s significant economic strengths and maintained belief in the country’s long-term financial health.
- While stock markets reacted negatively to the news, Bitcoin bucked the trend and soared to over US$105k over the weekend, approaching its all-time high of US$109,114.
Ratings agency Moody’s downgraded the United States’ top credit rating on Friday. The US rating was dropped from Aaa to Aa1, following other agencies such as Fitch Ratings and S&P Global Ratings and citing concerns over US debt and interest payments.
US federal debt has risen sharply due to continuous fiscal deficits. This one-notch downgrade on our 21-notch rating scale reflects the increase over more than a decade in government debt and interest payment ratios to levels that are significantly higher than similarly rated sovereigns.
Moody’s A Moody’s statement added that it “recognise the US’ significant economic and financial strengths”, but analysts also “believe these no longer fully counterbalance the decline in fiscal metrics”.
Related: Avenir Group HODLs $691 Million to Become Asia’s Top Bitcoin ETF Holder
Steven Cheung, a spokesperson for President Trump, strongly opposed the downgrade, accusing Mark Zandi, an economist for Moody’s Analytics, of being a Trump critic.
Nobody takes his ‘analysis’ seriously. He has been proven wrong time and time again.
Steven Cheung, Trump spokesperson The downgrade is just one step down on a 21-notch scale and the agency still believes in the long-term financial health of the United States.
Stock markets reacted negatively to the news; however, most cryptocurrencies seem to have bucked the trend. Bitcoin (BTC) is up 1.25 per cent in the past 24 hours, XRP is also up by 0.5 per cent, while Ethereum (ETH) and others have fallen.
Over the weekend, the Bitcoin price soared over US$105k (AU$163.6k), trading for as high as US$106,847 (AU$166,548), levels not seen since January, when BTC made its all-time high of US$109,114 (AU$170,076).
Moody’s Rating Just a Big “Nothing Burger”?
While not all analysts agree with Moody’s rating – analyst Jima Bianco called it a “nothing burger” – others have been more critical.
Gabor Gurbacs, the CEO and founder of Pointsville, a company offering crypto loyalty rewards, said that Moody’s assessment was unrealistic and overly optimistic.
This is the same Moody’s that gave Aaa ratings to sub-prime mortgage-backed securities that led to the 2007-2008 financial crisis.
Gabor Gurbacs, Pointsville Related: Bitcoin Breaks Away from Gold as Investors Pivot to Crypto, JPMorgan Finds
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Author
Aaron Feuerstein
Aaron Feuerstein is a freelance writer based in Melbourne. His focus is on decentralised finance and the regulatory space surrounding blockchain. He holds a Master's in Accounting. When he is not studying the latest legal case, he enjoys his time as a modest but eager hobby cook.
