Cryptocurrencies Bounce Back After Moody’s Downgrade, Bitcoin Eyes $138K
Cryptocurrencies recovered from early losses on Monday as broader risk assets shrugged off Moody’s recent downgrade of U.S. government bonds.
Bitcoin (BTC) dipped to a session low near $102,000 in early U.S. trading, retreating from its record weekly close of $106,600 overnight. However, it quickly rebounded, climbing back above $105,000 by the afternoon, up 0.4% over the past 24 hours. Ether (ETH) also regained strength, rising 1.2% to reclaim the $2,500 mark.
Among large-cap altcoins, DeFi lending platform Aave (AAVE) led gains, while other tokens in the CoinDesk 20 Index remained mostly in negative territory despite recovering from earlier lows. Solana (SOL), Avalanche (AVAX), and Polkadot (DOT) declined between 2% and 3%.
The broader market rally was not limited to crypto—U.S. equities also bounced back, with the S&P 500 and Nasdaq erasing their morning losses.
The initial selloff came after Moody’s downgraded the U.S. credit rating from AAA late Friday, unsettling bond markets and pushing the 30-year Treasury yield above 5%, with the 10-year note surpassing 4.5%.
Despite the headline, some analysts believe the downgrade’s impact on asset prices will be limited over the long term.
“What does the downgrade mean for markets? In the long run, really nothing,” said Ram Ahluwalia, CEO of Lumida Wealth. He noted short-term selling pressure could arise from institutional investors needing to rebalance portfolios due to mandates requiring AAA-rated securities.
“Moody’s downgrade was expected — the last of the major rating agencies to act,” added Callie Cox, chief market strategist at Ritholtz Wealth Management. “That’s why stock investors aren’t overly concerned.”
Looking ahead, 21Shares, a digital asset ETF issuer, remains bullish on bitcoin’s outlook for 2025.
“Bitcoin is on the verge of a breakout,” said research strategist Matt Mena. He attributes the rally to structural factors such as increasing institutional inflows, a historic supply squeeze, and improving macroeconomic conditions—signaling a mature and sustainable push toward new highs.
Spot Bitcoin ETFs continue to absorb more BTC than the daily mining supply, tightening overall availability. Meanwhile, institutional buyers, corporations like Strategy, emerging players such as Twenty One Capital, and even governments exploring strategic reserves are accumulating bitcoin.
Mena projects bitcoin could climb to $138,500 this year—a roughly 35% increase from current levels—highlighting robust upside potential for the leading cryptocurrency.
