ETH, DOGE, XRP Drop 3% Following Moody’s U.S. Credit Rating Downgrade

Major cryptocurrencies experienced a downturn on Saturday as traders processed the ramifications of Moody’s Ratings decision to downgrade the U.S. credit rating. Ethereum (ETH), XRP, and dogecoin (DOGE) each fell by approximately 3%. The overall cryptocurrency market remained stable at $3.3 trillion, losing some earlier gains after reaching a weekly peak.

The decline followed Moody’s decision to lower the U.S. sovereign credit rating from Aaa to Aa1, attributing the change to the country’s increasing deficits, rising interest costs, and a perceived lack of political determination to control spending. This downgrade aligns Moody’s with Fitch and S&P, which have also assigned ratings below the once-untarnished triple-A designation that the largest global economy has long held.

In response, the White House quickly issued statements from officials criticizing the downgrade and suggesting that the move was politically motivated.

Traditional financial markets reacted promptly: U.S. Treasury yields increased, with the yield on the 10-year note climbing to 4.49%, and S&P 500 futures dropped by 0.6% in after-hours trading.

Historically, worries about U.S. debt sustainability and potential dollar devaluation have benefited bitcoin and other decentralized assets. However, credit downgrades can also induce short-term risk-averse behavior, especially if macroeconomic uncertainties prompt institutional investors to cut their exposure.

Additionally, some traders expressed concerns about a potential deeper market decline in the short term due to general profit-taking ahead of a possible rally. Alex Kuptsikevich, chief market analyst at FxPro, noted that bitcoin is currently holding the $104,000 level as a significant benchmark. He remarked that while sellers have not yet taken control of the market, sustained resilience at high levels may be short-lived before the next upward movement, indicating considerable pressure near the upper limits of the current trading range. He also suggested that the short-term outlook implies a likely decrease from present levels.