Why Is Bitcoin Falling Today? Here is The Likely Reason

Bitcoin edged lower on Monday following a major shift in investor sentiment after Moody’s Ratings downgraded the U.S. sovereign credit rating. 

The credit rating agency reduced the United States’ long-standing “Aaa” rating to “Aa1,” citing rising fiscal pressure due to the $36 trillion national debt and growing interest obligations. The decision marked Moody’s first U.S. downgrade since assigning its top-tier rating over a century ago in 1919.

The timing of the downgrade coincided with Bitcoin’s pullback from its four-month peak. After hitting an overnight high of $107,060 and recording its strongest-ever weekly close near $106,500, the crypto declined to $102,200 during the session. 

Over the past 24 hours, Bitcoin’s value dropped by 1.29%, wiping out its weekly gains. The retreat highlighted a shift in risk appetite, with investors responding to heightened fiscal uncertainty by reducing exposure to speculative assets.

However, responding to the downgrade, White House spokesperson Kush Desai criticized Moody’s credibility, referencing perceived inaction during the prior administration.

Meanwhile, Treasury Secretary Scott Bessent downplayed the immediate impact of the decision, calling it a “lagging indicator” with minimal influence on fiscal planning.

BREAKING⚡:

🇺🇸 TRUMP DISAGREES WITH MOODY’S DECISION TO DOWNGRADE THE U.S. CREDIT RATING. pic.twitter.com/NlLy9vm57t

— Marzell (@MarzellCrypto) May 19, 2025

Derivatives Activity Signals Heightened Volatility

Amid the broader market reaction, Bitcoin derivatives markets experienced a notable surge in activity. Trading volume spiked by 137.84% to $164.24 billion, signaling increased speculative interest. Despite this, open interest grew only 0.95% to $69.85 billion, suggesting rapid position turnover rather than long-term commitments.

Liquidation data underscored this volatility. Over a 12-hour window, total liquidations reached $48.28 million, with long positions accounting for $40.77 million. Across 24 hours, $156.92 million in total positions were liquidated, $87.20 million in longs and $69.72 million in shorts.

Greater Volatility Incoming?

Moody’s downgrade follows similar actions by Fitch Ratings in 2023 and Standard & Poor’s in 2011. Analysts noted that the cumulative effect of these downgrades may contribute to higher borrowing costs for both the public and private sectors in the United States. This may lead to greater volatility in financial markets.

Spencer Hakimian of Tolou Capital Management reported that the downgrade could translate into long-term financial strain across markets, potentially raising the cost of capital.

While this development temporarily disrupted Bitcoin’s rally toward a new all-time high, crypto industry commentators remain largely unfazed by the short-term pullback. Notably, there have been renewed calls for the beginning of “altcoin season” and predictions of a continued Bitcoin rally to as high as $250,000 by influential figures such as Arthur Hayes.

Interestingly, MicroStrategy’s Michael Saylor also disclosed a fresh, multi-million-dollar Bitcoin acquisition today. This signals continued institutional confidence in the asset despite macroeconomic headwinds.