Moody’s US credit system historic downgrade can add fuel to Bitcoin Safe Haven Status

Moody’s downgraded the US long-term credit rating from AAA to AA1 on May 16, for the first time in history, depriving the US of its highest level status.

The agency noted a decade-long rise in debt levels, increased interest burdens, and consistent failures by policymakers to enact meaningful deficit management.

According to Moody’s, the federal deficit is expected to grow sharply in the coming years, potentially reaching 9% of GDP by 2035, up from 6.4% in 2024 as spending commitments increase and interest costs consume federal budgets.

Moody has confirmed a “stable” outlook for now, citing the status of the dollar’s reserve currency and the size of US financial markets, but the downgrade shows a symbolic fracture in the global perception of US creditworthiness.

The move, following S&P’s advance cuts in 2011 and Fitch in 2023, was the first in modern financial history to not receive the highest rating in the US.

Market response was modest and Treasury yields were higher. However, the long-term impact on institutional portfolios, particularly built on the assumption of risk-free debt in the US, can ripple outward over time.

Bitcoin stays firmly in the sovereign credit shakeup

Bitcoin (BTC) has maintained its position above $100,000 amidst sustained macro uncertainty, highlighting its new status as a non-sorber in hedge against fiscal instability.

Based on encrypted data, Bitcoin was trading at $103,591 at press time, an increase of 0.15% over the past 24 hours. Meanwhile, many of the major altcoins saw downward sales pressure and volatility following the news.

Bitcoin and stocks showed resilience when the US last faced valuation cuts in 2023. The pattern may be repeated, but the market is cautious about the possibility of Monday sales.

The resilience of flagship cryptocurrency contrasts with the historical view of cryptocurrency as a risk-on asset, suggesting that a growing investor base treats Bitcoin as a strategic allocation during macroeconomic uncertainty.

Many in the industry see the stability of Bitcoin’s price after downgrade as further evidence that its safe haven story has gained traction among investors.

With the centralized currency system facing the challenge of reliability, capital appears to be increasingly open to decentralized alternatives backed by codes, rarity and network effects, rather than government promises.