Bitcoin (BTC) Price Surges Back to $105K Following Moody’s Downgrade; Crypto ETF Provider Anticipates 35% Growth

Cryptocurrencies found their footing again on Monday after encountering a challenging trading start, reflecting a broader rebound in risk assets as investors considered Moody’s downgrade of U.S. government bonds.

Bitcoin staged a significant recovery after dipping to a low of $102,000 earlier in the day, following a record weekly close at $106,600. In afternoon trading, the leading cryptocurrency regained momentum, rising to $105,000, marking a 0.4% increase over the previous 24 hours. Ether also rose by 1.2%, returning to the $2,500 mark.

The DeFi lending platform Aave outshone many large-cap altcoins, although most members of the broader CoinDesk 20 Index were still in the negative, though they did improve from their daily lows. Solana, Avalanche, and Polkadot saw declines ranging from 2% to 3%.

U.S. stocks participated in the uptick as well, with the S&P 500 and Nasdaq reversing their early morning losses.

The initial decline in both crypto and equities followed Moody’s decision late Friday to downgrade the U.S. credit rating from its previously pristine AAA status. This action unsettled bond markets, causing 30-year Treasury yields to exceed 5% and the 10-year note to surpass 4.5%.

Nonetheless, some analysts downplayed the downgrade’s potential long-term effects on asset prices.

In a Monday report, Ram Ahluwalia, CEO of Lumida Wealth, noted, “What does this downgrade mean for markets? In the long run – really nothing.” He mentioned that in the short term, there might be some selling pressure focused on U.S. Treasuries due to large institutional investors adjusting their portfolios, as many are required to hold only AAA-rated securities.

Callie Cox, chief market strategist at Ritholtz Wealth Management, remarked on social media that Moody’s downgrade was expected, stating, “This was a long time coming, which is why investors in stocks don’t seem to be alarmed.”

Bitcoin Targets $138K This Year

As Bitcoin hovers just below its January all-time high, digital asset ETF issuer 21Shares envisions further potential for appreciation this year.

Research strategist Matt Mena expressed in a report that “Bitcoin is on the brink of a breakout.” He attributed the current rally to a mix of institutional investment, a historic supply crunch, and positive macroeconomic factors that suggest a more sustainable path to new highs.

Spot Bitcoin ETFs have been consistently acquiring more BTC than is mined each day, tightening supply, while major institutions and corporations, including Strategy and newcomer Twenty One Capital, are actively accumulating Bitcoin, with some states even looking to create strategic reserves.

Mena anticipates that these elements could propel Bitcoin’s price to around $138,500 this year, signifying approximately a 35% increase for the dominant cryptocurrency.