Will Cryptos Benefit From FX, Bond Markets Mirroring Moody's US Debt Warning?

Investors now have the US deficit to worry about, as if tariffs weren't enough.

But for cryptos, the dollar's slump towards the lowest since December 2023 is actually a boost.

Of course, short-term volatility bit into Bitcoin trading at life highs near $111,000. This was specifically from Trump's social media posts, whacking a clear bullish trend or narrative for the OG crypto token.

Trump's trade war has smacked broader global markets, a widely seen trend this year. However, crypto trading has been mixed. In the short term, they have fallen in tandem with stocks on risk-off bets and surged in line with gold on safe-haven bets.

Still, a longer view indicates increasing crypto bets as investors are forced to choose between a skyrocketing asset in Bitcoin and looking for more compensation to keep their money for longer in the so-called safe US Treasuries.

Barring the fall on Friday in US Treasuries on a safe-haven bet from Trump's 50% tariffs threat on Europe, which at the moment seems more of a negotiating tactic, longer-dated US Treasury yields surged above 5% to the highest since 2007, a year before the financial crisis began.

Bond markets have rejected Trump's economic broadsides, including his beautiful tax bill weighing heavily on the dollar.

Bond traders have echoed Moody's concerns on surging US debt and servicing costs, which are expected to hit $1 trillion this year, up from $263 billion in 2017.

The 'sell American assets' is not helping the dollar or Treasuries either. The money has to move somewhere for investors looking for returns and beyond record-setting gold.

So, those looking for alternative assets have put that money into cryptos, with institutional investors betting big on Bitcoin.

Why are bond markets shuddering on America's fiscal mess?

A downgrade by Moody's Investors Service on May 16 marked a significant turning point for the world's largest economy. It indicated that the US government had lost its sole triple-A credit rating from a prominent international ratings agency.

The current national debt in the United States is approximately $36 trillion, which translates to approximately $106,100 for each individual in the nation.

Republicans in Congress are pushing through Trump's proposed tax and spending plan, which opponents argue will increase the national debt by trillions of dollars over the next decade, making an already dire situation even worse.

Both Fitch Ratings and S&P Global Ratings have downgraded the US since 2011.

As a percentage of GDP, debt interest expenses have been steadily rising since inflation swept away the period of historically low rates.

So, the bond markets hating Trump's beautiful tax bill is not surprising.

Investors remember that the 1990s bond market demand for far higher yields was the only thing that convinced policymakers to reduce the deficit. They reason that there really is no check on US politicians right now, and thus, it could be worthwhile to repeat the event.

The narrative seems to be a boost for cryptos, as the asset class is the least likely to be impacted, similar to tariffs.

However, the digital assets industry is more concerned about how the high debt and inflation from tariffs impact the Federal Reserve's monetary policy path.

The bigger impact and the spillover are likely to be on traditional assets.

Still, the crypto market will be volatile in the short run, with Trump's whims and fancies playing a different tune almost every other day.

Bitcoin, which had surged to a new life high this week of above $110,000, was last changing hands at around $109,500.

The debate before Trump's announcement on Friday was how high Bitcoin would surge.

For now, though, the longer view of a bull run in Bitcoin is still intact, with the path of least resistance tilted more broadly to the upside for cryptos.

Elsewhere

Singapore & the Future of Crypto (11 June)

​Join us for a compelling fireside chat on 11 June with Jeremy Tan , entrepreneur and independent GE2025 candidate, as he sits down with Saad Ahmed, Head of APAC at Gemini, to explore what Bitcoin really is, why it matters, and how it could help shape the future of Singapore — and its people.

​Whether you're new to Bitcoin, curious about crypto, or eager to understand where the future of money is headed, this is your chance to gain clear, honest insights. No jargon. No hype. Just practical knowledge for everyday Singaporeans.

The event is free to attend, though seats are limited and subject to confirmation. If not approved, you’ll still receive a livestream link to attend online. Apply early to secure your spot!

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Singapore's Bitcoin Candidate Jeremy Tan on Disrupting Politics & Finance

This week we have a special guest, Jeremy Tan , the independent candidate for Mountbatten SMC who garnered a surprising 36% of the vote in Singapore's general election by centering his campaign on, among other things, Bitcoin adoption. Jeremy discusses his motivations for bringing Bitcoin into the political arena, highlighting the need for Singapore to consider it as a hedge against US dollar instability, and addresses the Monetary Authority of Singapore's (MAS) cautious stance on crypto, suggesting a disconnect between the official narrative and behind-the-scenes activity.

Blockcast is hosted by Head of APAC at Ledger, Takatoshi Shibayama . Previous episodes of Blockcast can be found here , with guests like Alex Ryvkin (Rho), Hassan Ahmed (Coinbase), Sota Watanabe (Startale), Nic Young (Oh), Jacob Phillips (Lombard), Chris Yu (SignalPlus), Kathy Zhu (Mezo), Jess Zeng (Mantle), Samar Sen (Talos), Jason Choi (Tangent), Lasanka Perera (Independent Reserve), Mark Rydon (Aethir), Luca Prosperi (M^0), Charles Hoskinson (Cardano), and Yat Siu (Animoca Brands) on our recent shows.