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As this piece was being prepared, the leading cryptocurrency was trading at $104,333, while altcoins showed slight recovery today. The market’s recent turmoil, incited by Trump’s influence, seems to diminish for now. Anticipation looms for more moderate statements to emerge shortly. Meanwhile, how will the growing alarm in US credit-default swaps (CDS) affect the crypto markets?
Rising US CDS
The US government’s default risk, defined by CDS, is escalating rapidly. This rise, a negative economic signal, stems from the Trump administration’s aggressive policies. US one-year CDS surged to 52 basis points, marking the highest in 2023.
Previously, the 2023 debt ceiling crisis had pushed CDS upward. However, despite no current talks of a government shutdown, the increase persists. Excluding the debt ceiling crisis, current CDS levels have hit a 12-year high.
“Unsettled CDS volume grew ~1 billion dollars this year, reaching 3.9 billion dollars, the second highest since 2014.
This situation triggers growing concerns about the US government’s widening budget deficit. In January, the US reached its legal borrowing limit, taking ‘extraordinary measures’ to avoid default. The debt ceiling crisis never fully resolved.” – TKL
CDS growth is negatively impacting the global economy and indirectly affecting the broader crypto markets. This elevation, fuelled by Trump’s fierce tariff policies, could heighten borrowing costs, making it crucial for the Trump administration to exhibit leniency.
Cryptocurrencies
The Treasury Secretary hinted that the initial six months were chaotic, predicting the latter quarters as a period to reap fruitful outcomes. Cryptocurrencies are anticipated to commence their upward trend during this harvest period in the latter two quarters. Particularly, potential altcoin ETF approvals as of November could create a significant impact.
DaanCrypto warned investors on what to be vigilant about:
“When the market stabilizes, major unlocks of held tokens will significantly impact you.
Such unlocks are generally well absorbed during substantial upward trends. However, if the market is in a downturn with minimal risk appetite, holding these coins often leads to painful declines with minor bounces. This has been evident in numerous coins over recent years.”
Meanwhile, Mags shared the following cup-and-handle pattern.
This model suggests the bullish trend is proceeding smoothly, with BTC advancing towards $125,000.
