Bitcoin’s Bold Move: Ignoring Moody’s Doom & Gloom, Climbs Back to $105K!

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Key takeaways:

  • Bitcoin decided to shrug off the chaos caused by Moody’s credit downgrade of the US. It bounced back from a quick sell-off, showing that it might just be the rebellious hedge against uncertainty that investors didn’t know they needed.

  • Moody’s dropped the US credit rating to Aa1, citing a sky-high $36 trillion debt and escalating deficits. This spooked the markets, sending US Treasury yields through the roof.

  • While short-term market jitters may have knocked Bitcoin down, its long-term outlook still looks like a bull on steroids, thanks to cautious shorts and a weak dollar.

Bitcoin (BTC) faced a sudden 4% dip during the Asian trading session on May 19, falling from an “important level” that Glassnode had its eye on. The price came to a screeching halt just below $106,600 – a point where 31,000 BTC are hanging out. That cluster of coins, dating back to Dec. 16, 2024, shows that holders aren’t losing their nerve just because the market throws tantrums. They’re just waiting it out.

This drop came after a series of unfortunate events, with Moody’s sending the US credit rating plummeting, and US Treasury yields going into beast mode. Naturally, investors started to freak out about risk assets like Bitcoin.

Moody’s Downgrades the US: Hold On Tight!

On May 16, after the US markets had shut their doors for the day, Moody’s decided it was time to knock the US credit rating from Aaa to Aa1. It was the first downgrade in modern history—talk about a mic drop. Their reasoning? The US’s ever-expanding $36 trillion debt and an alarming deficit that could hit 9% of GDP by 2035, up from 6.4% in 2024. No biggie, right?

Interest payments on the national debt are expected to gobble up a full 30% of federal revenue by 2035. It was already at 18%. After a similar downgrade by S&P in 2011 and Fitch in 2023, this new Moody’s bombshell shook investor confidence, causing chaos in the markets.

The downgrade also coincided with a spike in US Treasury yields. The 10-year Treasury yield jumped to 5.53% post-downgrade on May 19, while the 30-year yield followed suit at 4.98%. These moves were a signal that investors were fretting about higher borrowing costs for Uncle Sam.

The Kobeissi newsletter mentioned that in past downgrades, yields responded in different ways—dropping by 35% after S&P’s 2011 downgrade but rising by 23% after Fitch’s 2023 downgrade. This time, we’re seeing something like 2023, with yields climbing. So, naturally, investors took their money out of risky assets like Bitcoin and sought refuge elsewhere.

Can Bitcoin Turn Short-Term Pain into Long-Term Gains?

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We’ve seen Bitcoin act like a digital safe during chaos—remember the COVID-19 meltdown? And given the US fiscal trainwreck, Bitcoin could once again emerge as a hero as trust in traditional currencies continues to erode.

Meanwhile, the US Dollar Index (DXY) might be looking at a potential fall below $100. With a weak dollar comes a classic “risk-off” response, which is like waving a flag to Bitcoin. Gold is already seeing a little love, though not much, with a modest 0.4% uptick. But Bitcoin, that rebellious teenager of finance, might find itself in a much better spot, thanks to the faltering dollar.

“Despite the risk-off sentiment, Bitcoin could find itself stronger than ever, thanks to its “digital gold” reputation and a weak dollar.” – Axel Adler Jr.

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2025-05-19 20:39