According to The Kobeissi Letter, the US experienced a major credit rating downgrade in 2011 when S&P reduced its rating from AAA to AA+. This event triggered an approximately 8% drop in the S&P 500 over two months and saw the 10-year Treasury yield fall by as much as 35% within the same period (source: The Kobeissi Letter, May 17, 2025). For crypto traders, historical data shows that such macro shocks often drive increased volatility and inflows into Bitcoin and alternative digital assets, as investors seek non-sovereign stores of value following sharp equity and bond market moves. This context is critical for anticipating crypto market reactions to any future US credit rating actions.

According to The Kobeissi Letter, Fitch downgraded the US long-term credit rating from AAA to AA+ in 2023, citing concerns over rising US debt, unresolved fiscal challenges, and persistent Fed rate hikes (Source: Kobeissi Letter, May 17, 2025). This downgrade set the stage for Moody’s recent historic downgrade, which is expected to increase volatility across traditional and crypto markets. Traders should monitor potential capital flows from US Treasuries into alternative assets like Bitcoin and Ethereum, as increased risk aversion and uncertainty about US fiscal stability could enhance crypto’s appeal as a hedge (Source: Kobeissi Letter). Crypto trading strategies should focus on heightened volatility, potential inflows into decentralized assets, and correlation shifts between digital assets and traditional safe havens.