Moody’s downgraded the United States’ long-term credit rating from Aaa to Aa1 on May 16, marking the first time in history the agency has stripped the US of its top-tier status.
The agency pointed to a decade of rising debt levels, escalating interest burdens, and a consistent failure by policymakers to enact meaningful deficit controls.
According to Moody’s, federal deficits are expected to widen sharply in the coming years, potentially reaching 9% of GDP by 2035, up from 6.4% in 2024, as spending commitments grow and interest costs consume more of the federal budget.
While Moody’s affirmed a “stable” outlook for now, citing the dollar’s reserve currency status and the scale of US financial markets, the downgrade marks a symbolic fracture in global perceptions of US creditworthiness.
The move follows prior cuts by S&P in 2011 and Fitch in 2023, leaving the US with no top-tier rating for the first time in modern financial history.
Market reaction was modest, with Treasury yields edging higher. However, the longer-term implications, especially for institutional portfolios built on the assumption of US risk-free debt, may ripple outward over time.
Bitcoin stays firm amid sovereign credit shake-up
Bitcoin (BTC) maintained its position above $100,000 amid the sustained macro uncertainty, highlighting its emerging status as a non-sovereign hedge against fiscal instability.
Based on CryptoSlate data, Bitcoin was trading at $103,591 as of press time, up 0.15% over the past 24 hours. Meanwhile, many of the major altcoins saw some downward selling pressure and volatility following the news.
Bitcoin and equities showed resilience the last time the US faced a rating cut in 2023. The pattern may repeat, but the market remains cautious of potential selling on Monday’s open.
The flagship crypto’s resilience contrasts with the historical view of cryptocurrencies as risk-on assets, suggesting a growing investor base now treats Bitcoin as a strategic allocation during macroeconomic uncertainty.
Many in the industry see Bitcoin’s price stability following the downgrade as further evidence that its safe-haven narrative is gaining traction among investors.
With centralized monetary systems facing credibility challenges, capital appears increasingly open to decentralized alternatives backed by code, scarcity, and network effects rather than government promises.
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