Bitcoin, the popular cryptocurrency, found itself in an extended consolidation phase after the United States lost its last triple-A credit rating on Friday. The price of Bitcoin (BTC) hovered around $103,000, marking a 2.8% dip from its recent peak. This pullback led to a decrease in its market capitalization to $2.045 trillion.
Moody’s, one of the leading credit rating agencies globally, made headlines on Friday by downgrading the US credit rating from Aaa to Aa1. The agency pointed to the deteriorating fiscal situation in the US as the primary reason for the downgrade. This move by Moody’s followed similar actions by other rating agencies, including S&P Global in 2011 and Fitch Ratings in 2022. The downgrade came after Moody’s shifted its outlook on the US economy to negative a year earlier.
The US fiscal landscape has been marred by rising public debt, surpassing $36.8 trillion. Expenditures on programs like Medicare and Medicaid climbed to $1.6 trillion, while spending on social security, defense, and interest reached $1.5 trillion, $900 billion, and $1.02 trillion, respectively. Despite efforts by Elon Musk’s Department of Government Efficiency to cut costs, analysts remain skeptical about its impact on reducing the budget deficit. The Trump administration’s push for tax cuts is expected to widen the deficit by $4.5 trillion over the next decade.
The downgrading of the US credit rating could potentially serve as a positive catalyst for Bitcoin, which has been gaining traction as a safe-haven asset. Bitcoin has outperformed the stock market since the Liberation Day speech and even during the COVID-19 pandemic. The cryptocurrency is further supported by supply and demand dynamics, with dwindling supply on exchanges and increasing demand. Spot Bitcoin ETFs have attracted over $41 billion in inflows since January last year, while companies like Strategy and Twenty One continue to make purchases.
Bitcoin Price Technical Analysis
Analyzing the daily chart, Bitcoin’s price has been stuck in a consolidation phase with dwindling volume. Despite this, Bitcoin has managed to stay above the 50-day Exponential Moving Average, signaling a positive trend. The formation of a bullish pennant pattern, characterized by a vertical line and a symmetrical triangle, suggests a strong bullish breakout. Additionally, the cup-and-handle pattern, featuring a rounded bottom and consolidation, indicates potential gains in the upcoming weeks. A move above the upper side of the cup could propel Bitcoin’s price to $110,000 and beyond.
In conclusion, Bitcoin’s price consolidation following the US credit rating downgrade reflects the cryptocurrency’s resilience in the face of macroeconomic challenges. With promising technical patterns and increasing demand, Bitcoin continues to solidify its position as a sought-after asset in uncertain times.
