Cryptocurrencies made a strong comeback on Monday, bouncing back after a challenging start to the trading session. This recovery mirrors a broader rally in risk assets as investors digest recent economic developments, including Moody’s downgrade of U.S. government bonds. Bitcoin led the charge, rebounding from an early dip to around $102,000 and climbing back to $105,000 in afternoon trading, representing a 0.4% increase over 24 hours. Following its impressive weekly close at $106,600 overnight, Bitcoin continues to target new highs, with some analysts forecasting a potential surge to $138,000 this year.
Ethereum also gained momentum, rising 1.2% to reclaim the $2,500 level, signaling renewed confidence in the broader crypto market. Among altcoins, DeFi lending platform Aave outperformed many large-cap cryptocurrencies, although most members of the broad-market CoinDesk 20 Index remained in the red, with Solana, Avalanche, and Polkadot down 2% to 3%.
The rally wasn’t limited to digital assets—U.S. stocks also saw improvements, with the S&P 500 and Nasdaq erasing their morning declines. This market bounce followed Moody’s decision to downgrade the U.S. credit rating from AAA late Friday, which initially rattled bond markets, causing 30-year Treasury yields to climb above 5% and the 10-year note to exceed 4.5%. Despite this, many analysts believe the long-term impact of the downgrade will be limited.
Industry experts suggest that in the short term, some institutional investors may engage in rebalancing, leading to temporary selling pressure on U.S. Treasuries. However, this downgrade was widely anticipated, and market participants remain largely unfazed. As Callie Cox, chief market strategist at Ritholtz Wealth Management, notes, “That’s why stock investors don’t seem to care.”
Meanwhile, Bitcoin’s bullish outlook remains intact, with industry insiders like 21Shares’ research strategist Matt Mena emphasizing that the current rally is driven by structural factors such as increased institutional inflows, a historic supply crunch, and improving macroeconomic conditions. Mena forecasts that these trends could propel Bitcoin to approximately $138,500 by year’s end, representing a roughly 35% rally for the leading cryptocurrency.
As the market continues to navigate economic uncertainties, the resilience of cryptocurrencies suggests a maturing asset class with significant upside potential. Investors are keeping a close eye on macro developments and institutional participation, which could shape the next phase of the crypto bull run.
