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On August 1st, a significant event occurred in the financial world. Credit rating agency Fitch made a historic move after years. Fitch downgraded the credit rating of the US government from AAA to AA+. This downgrade indicated a decrease in confidence in the US government’s ability to effectively fulfill its financial responsibilities. On the other hand, popular crypto commentator DOGE shared his prediction.
Fitch Decision and Cryptocurrencies
The downgrade pushed investors to adopt a cautious approach and led many to withdraw their money from assets such as stocks, silver, oil, and long-term bonds. Instead, they preferred cash and short-term instruments perceived as safer options during uncertain times. As can be seen from the graph above, Fitch’s decision to downgrade the US government’s credit rating also had an impact on commodities and stocks.
A report published by Moody’s Analytics in May indicated that a downgrade of the US Treasury debt rating could lead to further credit downgrades in the financial sector, potentially causing a domino effect. Interestingly, despite the decision, the risk premium remained unchanged, as shown by credit default swaps (CDS).
As a result, Bitcoin may not be immediately affected by the downgrade of the US government’s credit rating. The initial flight to liquidity often overlooks the benefits of decentralized assets during early market turbulence. Considering Bitcoin’s digital scarcity and fixed supply, it stands out as a valuable asset amidst expanding government debts that could erode the value of cash. Consequently, investors may consider Bitcoin as an increasingly secure haven and a robust asset class resistant to censorship due to its decentralized nature.
I remember experts saying something similar about Bitcoin versus inflation back in early 2022. Let’s hope that in the new narrative, Bitcoin sees a wave of demand that can express its mission.
Expert Commentary on Dogecoin
DOGE missed out on a huge opportunity today. Semafor was talking about X (formerly known as Twitter) potentially launching an integrated exchange on its platform in the evening hours. This news could have sparked massive speculation about DOGE, causing investors to flock to the charts. However, within an hour of the news being released, Elon Musk said, “As far as I know, there is no such thing,” and the matter was closed. We previously mentioned that the company had applied for licenses for integrated payment services. Considering that the integrated exchange idea is also owned by Elon Musk, it doesn’t sound far-fetched. Let’s see, maybe the mischievous billionaire will announce the good news himself in the coming days. Semafor based these claims on presentations sent to potential investors.
On the other hand, Kaleo, a well-known crypto commentator known for anticipating major movements, says that people will accumulate more DOGE. He believes that the price drop has ended and it could soon climb to the $0.1 region.
