Bitcoin held near $104,000 as a U.S. credit downgrade pressured crypto markets

Bitcoin held near $104,000 on May 17, 2025, while ether, XRP and dogecoin fell roughly 3% as cryptocurrency traders absorbed Moody’s downgrade of the United States’ sovereign credit rating. The reaction provided a compact test of two competing views of bitcoin: a scarce monetary asset that may benefit from concern about government finances, and a volatile risk asset that can decline when investors reduce exposure.

Moody’s announced on May 16, 2025, that it had lowered the U.S. government’s long-term issuer and senior unsecured ratings from Aaa to Aa1. The agency also changed the outlook from negative to stable. Because the announcement arrived after the regular U.S. market session, continuously traded digital assets offered one of the first visible markets in which investors could respond on May 17.

A selective crypto sell-off

Contemporaneous reporting on May 17 placed bitcoin around $104,000 while describing ether, XRP and dogecoin as down approximately 3%. The reported total cryptocurrency market capitalization remained near $3.3 trillion after retreating from a weekly high.

Those figures should be treated as market snapshots, not official daily closes. Cryptocurrency trades continuously across venues, and the report did not specify a reference exchange, a uniform observation time or the baseline used for each percentage change. The approximately 3% moves therefore describe the contemporaneous direction and scale of the reaction; they do not establish synchronized UTC-day returns.

Even with that limitation, the relative performance was notable. Bitcoin was not immune to risk aversion, but it held more firmly than several large, higher-volatility tokens. That divergence is consistent with investors treating bitcoin as the most liquid and institutionally established crypto asset during a macroeconomic shock. It does not, by itself, prove that the downgrade caused every observed price move or that bitcoin had become a dependable safe haven.

Why the downgrade mattered

Moody’s said the one-notch reduction reflected a prolonged increase in U.S. government debt and interest-payment ratios compared with similarly rated sovereign borrowers. The agency’s action removed the final Aaa assessment that the United States still held among the three major rating firms: S&P had lowered its rating in 2011, and Fitch followed in 2023.

The Associated Press reported Moody’s projection that federal deficits could approach 9% of gross domestic product by 2035, compared with 6.4% in 2024, assuming no major policy correction. Moody’s nevertheless emphasized enduring U.S. strengths, including the size and resilience of the economy and the dollar’s reserve-currency role.

Traditional-market indicators also showed an initial defensive response. Contemporaneous reporting said the 10-year U.S. Treasury yield rose to 4.49% and S&P 500 futures declined 0.6% in after-hours trading. Those observations were snapshots rather than full-session results, but they placed the crypto move within a broader reassessment of sovereign borrowing and fiscal risk.

Bitcoin’s unresolved macro role

The May 17 response did not settle whether fiscal deterioration was ultimately positive or negative for bitcoin. Rising debt and concern about currency debasement could strengthen the argument for an asset with a fixed issuance schedule. Higher bond yields and reduced risk appetite could simultaneously pressure crypto valuations by raising the return available on conventional assets and tightening financial conditions.

What the market established on May 17 was narrower: bitcoin remained near six figures while several major alternative cryptocurrencies absorbed larger reported losses. The evidence supported relative resilience during the first trading window after the downgrade, not a permanent change in bitcoin’s relationship with sovereign credit, interest rates or the dollar.