Crypto Markets Dip as Moody’s Downgrades U.S. Credit Rating to Aa1, Triggering Risk-Off Mood

Major cryptocurrencies fell on Saturday as investors reacted to Moody’s Ratings’ decision to downgrade the U.S. sovereign credit rating.

The move, which pushed the U.S. from the top-tier AAA rating down to AA1, sent ripples across risk assets, including stocks and digital currencies.

Tokens such as ether (ETH), XRP, and dogecoin (DOGE) each shed around 3% following the announcement, as the broader cryptocurrency market briefly retreated from its weekly peak. Despite the decline, the total crypto market capitalization managed to hold around the $3.3 trillion mark, slightly below its earlier gains.

The credit downgrade reflects concerns over America’s ballooning fiscal deficit, surging interest obligations, and ongoing political gridlock preventing substantive action on federal spending. Moody’s cited these persistent issues as the primary justification for lowering the country’s creditworthiness.

With this move, Moody’s becomes the third major rating agency—after Fitch and S&P—to strip the United States of its pristine triple-A status. The downgrade immediately impacted traditional markets, with U.S. Treasury yields climbing. The yield on the benchmark 10-year note rose to 4.49%, and S&P 500 futures dropped by 0.6% in after-hours trading.

The White House swiftly responded to the news, pushing back against the downgrade.

Spokespersons for former President Donald Trump labeled Moody’s decision “politically motivated,” suggesting that the agency’s motives extended beyond purely financial analysis.

While fears of U.S. debt instability and the potential weakening of the dollar have historically boosted interest in decentralized assets like bitcoin, market participants appeared to be erring on the side of caution in the short term. Broad macroeconomic uncertainty seemed to trigger a classic risk-off environment, leading institutional traders to cut back exposure to volatile assets, including crypto.

Adding to the cautious sentiment, some analysts suggested that the current retreat might precede a larger sell-off driven by profit-taking after recent market rallies.

“Bitcoin is holding the $104,000 mark as a key level and the positive factor is that sellers have not yet managed to seize control of the market,” said Alex Kuptsikevich, chief market analyst at FxPro, in a note to CoinDesk.

“However, resilience at high levels may be temporary before the next bounce, and there is considerable pressure near the upper boundary of the current range,” Kuptsikevich added.

“In other words, the short-term outlook suggests a decline from current levels,” he concluded.

The coming days may determine whether crypto assets regain their upward momentum or succumb further to macroeconomic headwinds and shifting investor sentiment. 

By fLEXI tEAM