Rating of US credit decreases, Bitcoin remains unfazed
Bitcoin's price stayed nestled in a prolonged consolidation following the U.S.'s loss of its last Triple-A credit rating on a Friday. This financial juggernaut was peddling at around $103,000, dipping 2.8% from its peak this month. With this minor dip, its market cap now clocks in at a hefty $2.045 trillion.
The heavyweight news for the week originated from Moody's, one of the world's leading credit rating agencies. They downgraded the U.S.'s credit rating from the prestigious Aaa to Aa1, attributing it to growing deterioration in the nation's fiscal landscape.
Moody's took the plunge after S&P Global had done so in 2011, and Fitch Ratings followed suit in 2022. The removal of the Triple-A rating came a year after Moody's changed its outlook on the U.S. economy to negative.
As the U.S. fiscal situation deteriorated, the total public debt soared over $36.8 trillion. Medicare and Medicaid spending ballooned to $1.6 trillion, while social security, defense, and interest costs swelled to $1.5 trillion, $900 billion, and $1.02 trillion, respectively.
In parallel news, the Pi Network's price nosedived as concerns around centralization lingered. Despite the Department of Government Efficiency slashing expenses, analysts deemed the move insufficient to significantly reduce the budget deficit. However, the Trump administration was also keen on tax cuts, boosting the deficit by a whopping $4.5 trillion over the next ten years.
While the U.S. credit rating cut may serve as a positive catalyst for Bitcoin, an increasingly popular safe-haven asset, the specific impact is not delineated in the available data. Bitcoin's fortunes have generally fared better than the stock market since the Liberation Day speech and during the COVID-19 pandemic.
Aided by supply and demand dynamics, Bitcoin's supply on exchanges and over-the-counter markets has continuously dropped as demand surged. Since January last year, spot Bitcoin ETFs have attracted $41 billion in inflows, while companies like Strategy and Twenty One have continued to snap up the cryptocurrency.
The daily chart reveals that Bitcoin has been stuck in a consolidation phase for several days, with its trading volume persistently declining. Despite this, Bitcoin has managed to stay above the 50-day Exponential Moving Average. Furthermore, it has constructed a bullish pennant pattern, a popular continuation indicator, and a cup-and-handle pattern, both suggesting potential gains in the near future. A break above the upper edge of the cup could propel Bitcoin towards $110,000 and beyond.
- Amidst the challenge posed by the U.S.'s declining credit rating, investors may find solace in crypto assets like Bitcoin, which have shown resilience and gained popularity as safe-haven assets.
- Meanwhile, the Tron network has been experiencing significant investments, with companies like Strategy and Twenty One showing keen interest in acquiring tokens, as indicated by the inflows into spot Bitcoin ETFs.
- Defi projects, on the other hand, have been grappling with concerns around centralization, as exemplified by the sudden drop in the Pi Network's price.
- The initial coin offering (ICO) market has been quiet, but there are indications that Bitcoin might be preparing for gains, thanks to the bullish pennant pattern and the cup-and-handle pattern it has constructed on the daily chart.
