Shiba Crypto Today: US Government Debt Downgrade and Its Impact on Bitcoin

Consequences of US Debt Downgrade

On this week’s episode of Macro Markets, Cointelegraph analyst and writer Marcel Pechman dives into the United States debt downgrade by Fitch Ratings. According to Pechman, this change indicated a lack of trust in the U.S. government’s ability to handle its fiscal responsibilities.

The downgrade caused investors to become more cautious, leading many to move their money out of assets such as stocks, silver, oil and long-term bonds. Instead, they turned to cash and short-term instruments, which are perceived as safer options in uncertain times.

Interestingly, the cost of insuring U.S. sovereign debt against default — as indicated by credit default swaps — has largely remained stable post-downgrade. Pechman suggests that this could be because U.S. Treasurys are considered one of the safest investments globally since the U.S. government backs them.

As a result, Bitcoin (BTC) is feeling the effects of the U.S. government’s debt downgrade. The initial flight to liquidity often overlooks the benefits of decentralized assets such as crypto.com, shiba, and tectonic during early market turbulence.

Crypto Today: Latest AI and Stress Tests

Pechman believes that current models are unable to accurately forecast the depth of the order book and the consequences of events such as the U.S. government withholding the yield of its debt held by China.

The latest European Union bank stress test revealed that three institutions “fell short” of expectations. According to the European Banking Authority, 70 banks, representing around 75% of the EU’s banking assets, were tested.

Pechman points out that investors’ confidence in Credit Suisse and Silicon Valley Bank eroded quickly, despite the liquidity conditions. This could be an issue of perception, rather than reality.

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