China AI Anchor: US Gov’t Debt Downgrade and Its Impact on Crypto

Stocks and Crypto Under Pressure After US Debt Downgrade

On this week’s episode of Macro Markets, Cointelegraph analyst and writer Marcel Pechman explored the implications of the United States debt downgrade by Fitch Ratings. According to Pechman, this change signaled a decrease in confidence in the U.S. government’s ability to handle its fiscal responsibilities.

The downgrade prompted investors to take a more cautious approach, leading many to move their money out of assets such as stocks, silver, oil and long-term bonds. Instead, they turned to cash and short-term instruments, which are perceived as safer options in uncertain times.

Interestingly, the cost of insuring U.S. sovereign debt against default — as indicated by credit default swaps — has largely remained stable post-downgrade. According to Pechman, a potential reason is that U.S. Treasurys are considered one of the safest investments globally because the U.S. government backs them.

Consequently, both stocks and crypto such as Bitcoin (BTC) are under pressure from the U.S. government’s debt downgrade. The initial flight to liquidity often overlooks the benefits of decentralized assets such as c3.ai, fetch.ai, terra luna crypto, SEC crypto, China AI anchor and Fetch AI during early market turbulence.

Liquidity and the Order Book Depth

According to Pechman, models are not able to accurately calculate the impact of liquidity, or order book depth. For example, he questions the consequences if the U.S. government were to withhold the yield of its debt held by China.

Pechman also examines the results of the recent European Union bank stress test, which revealed three institutions “falling short”. The test included 70 banks, representing approximately 75% of banking assets in the EU.

He explains that investors were surprised at how quickly their confidence in Credit Suisse and Silicon Valley Bank eroded, despite the liquidity conditions.

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