- Bitcoin price held steady above $29,000 as a sense of fear spread in the market.
- Investors are fearful about the decision by Fitch to slash the US credit rating.
- Chainlink. Synthetix, XRP, and Stellar lumens were the worst performers.
Cryptocurrency prices remained under pressure on Thursday as a sea of unease engulfed the financial market. While some cryptocurrencies like XDC Network, Curve DAO Token, Optimism, and Hedera Hashgraph jumped, other tokens like Synthetix, Stellar Lumens, Litecoin, and Chainlink retreated by over 5% in the past 24 hours.
A sense of fear in the market
Investors have embraced a risk-off sentiment in the market this week as evidenced with the stock market sell-off and the jump of the US dollar index (DXY). The dollar index has surged to over $103 while key indices like the Dow Jones, Nasdaq 100, and S&P 500 have dropped by more than 2% in the past two days.
The trigger of this sell-off was a report by Fitch Ratings, a company owned by Hearst Corporation, which is also a big three ratings agency. It competes with Moody’s and S&P Global.
In a statement, the company downgraded America’s credit rating from Triple-A to AA+, in a move that has been rebuked by most economists. Its concern is that the US government has become almost dysfunctional in the past two decades. This is evidenced by the regular debt ceiling issues that happen regularly.
At the same time, the agency warned that the US debt was surging, exposing it to unimaginable economic risks. Still, most analysts believe that the US government is not at risk of defaulting since it can raise its interest payments.
The challenge, however, is that America’s debt is surging and is expected to hit over $50 trillion in the next few years. As such, if interest rates remain this high, there is a likelihood that annual interest payments will cross $1 trillion soon.
Bitcoin stalls as some altcoins slump
In theory, the warning on the country’s fiscal situation should be a good thing for cryptocurrencies like Bitcoin. For one, most analysts believe that Bitcoin is the digital version of gold. This explains why Bitcoin has held quite steady during the credit rating crisis.
Compound, one of the biggest DeFi protocols in the world, is one of the worst-performing cryptocurrencies on Thursday. It dropped amid rising concerns about regulations in the DeFi sector following the Curve DAO hack.
The other top underperforming cryptocurrencies were Synthetix, Stellar, Litecoin, Sui, XRP, and Chainlink. Litecoin price crashed even after the network went through halving. While halving is a bullish catalyst, it was already priced in by market participants.
Stellar Lumens and XRP prices dropped as the recent enthusiasm surrounding the Ripple and SEC case waned. The two coins were among the best performers when Ripple had a partial victory.
