Bitcoin’s next major move hinges on a $63 billion “fallen angel” signal that most investors are completely ignoring
Corporate credit score high quality is deteriorating beneath a floor that seems deceptively calm. JPMorgan tallied roughly $55 billion in US company bonds that slid from investment-grade to junk standing in 2025, the so-called “fallen angels.”
At the identical time, solely $10 billion returned to investment-grade standing as “rising stars.” Another $63 billion of investment-grade debt now sits close to the sting of junk, up from about $37 billion on the finish of 2024.
Yet, spreads stay remarkably tight: as of Jan. 15, FRED knowledge reveals investment-grade option-adjusted spreads at 0.76%, BBB spreads at 0.97%, and high-yield spreads at 2.71%.
Those are ranges that counsel investors are not but treating this as a credit score occasion, even because the pipeline of potential downgrades swells.
This disconnect of degradation underneath the hood and complacency on the floor creates precisely the form of backdrop the place Bitcoin can change into a convex macro commerce. Modest unfold widening sometimes acts as a headwind for threat property, together with Bitcoin.
However, if credit score stress accelerates sufficient to tug ahead Federal Reserve rate cuts or liquidity backstops, the identical dynamic that hammers Bitcoin initially can flip into the financial regime the place it traditionally catches a bid.
Credit stress as a two-stage mechanism
Bitcoin’s relationship with company credit score is state-dependent.
Academic analysis revealed in Wiley in August 2025 finds a damaging relationship between cryptocurrency returns and credit score spreads, with the linkage turning into considerably extra pronounced in stressier market states.
That construction explains why Bitcoin typically sells off when spreads widen, then rallies if the widening turns into extreme sufficient to shift the coverage outlook. The first section tightens monetary situations and reduces threat urge for food.
The second section will increase the chance of simpler financial coverage, decrease actual yields, and a weaker greenback. These are variables that Bitcoin cares about greater than crypto-specific information.
Bitcoin is very delicate to monetary liquidity narratives, not simply narratives inside to the crypto market. That sensitivity is why the “fallen angel” pipeline issues.
When company bonds lose investment-grade standing, they set off pressured promoting by regulated or mandate-constrained holders, akin to insurers, investment-grade-only funds, and index trackers. Additionally, sellers demand wider spreads to warehouse the chance.
European Central Bank monetary stability work notes that fallen angels can damage each costs and issuance situations for the affected companies, which may spill into equities and volatility.
Bitcoin sometimes feels that spillover by the identical channels that strain high-beta equities: tighter situations, diminished leverage, and risk-off positioning.
But the mechanism has a second act. If credit score deterioration turns into macro-relevant, with spreads hole wider quick sufficient to threaten company refinancing or set off broader monetary stress, the Fed’s toolkit contains precedent for intervention.
On Mar. 23, 2020, the Fed established the Primary Market Corporate Credit Facility and the Secondary Market Corporate Credit Facility to help company bond markets.
Bank for International Settlements analysis on the SMCCF finds that the bulletins considerably lowered credit score spreads, largely by compressing credit score threat premiums.
For Bitcoin, backstops and balance-sheet-style actions symbolize the form of liquidity regime change that crypto merchants are likely to front-run, typically earlier than conventional property absolutely reprice the coverage shift.
The non-credit asset angle
Credit deterioration is a reminder that company claims carry default threat, maturity partitions, and downgrade cascades. Bitcoin has none of these options. It has no issuer money stream, no credit standing, and no refinancing calendar.
In a world the place investors are de-risking credit score publicity, particularly when yields fall and the greenback weakens, Bitcoin can profit on the margin as a non-credit different.
This isn’t a “protected haven” argument. Bitcoin’s volatility profile makes that framing deceptive. It is a rotation argument: when credit score turns into the issue, property with out credit score threat can appeal to flows even when they carry different dangers.
Bitcoin-dollar correlations are time-varying and episodic, which suggests the “weaker greenback equals bullish Bitcoin” channel isn’t computerized.
However, in a situation the place credit score stress drives each decrease US yields and a coverage pivot, the greenback can weaken alongside falling actual charges, and that mixture is traditionally the most supportive macro combine for Bitcoin.
When complacency breaks
Current situations sit in an uncommon zone. Investment-grade spreads at 0.76% and high-yield spreads at 2.71% are compressed by historic requirements, but the downgrade pipeline is the biggest since 2020.
That creates three believable paths, every with completely different implications for Bitcoin.
In the “gradual bleed” situation, spreads drift wider however don’t hole. High-yield spreads would possibly rise 50 to 100 foundation factors, BBB spreads would possibly widen 20 to 40 foundation factors, and monetary situations tighten incrementally.
The Fed stays cautious, and Bitcoin behaves like a threat asset, struggling as liquidity situations tighten with none offsetting coverage shift. This is the most widespread consequence when credit score deteriorates progressively, and it’s often bearish or impartial for Bitcoin.
In the “credit score wobble” situation, spreads reprice to ranges that change the coverage dialog with out triggering a full disaster.
Reuters reported that high-yield spreads hit roughly 401 foundation factors and investment-grade spreads reached about 106 foundation factors in the course of the April 2025 stress episode. Those ranges are not disaster territory, however they are sufficient to make the Fed rethink its path.
If Treasuries rally on risk-off flows whereas the market pulls ahead fee cuts, Bitcoin can pivot from risk-off to liquidity-on sooner than equities. This is the “convex” situation: Bitcoin dumps initially, then rallies forward of the coverage shift.
In the “credit score shock” situation, spreads hole to disaster ranges, pressured promoting accelerates, and the Fed deploys balance-sheet instruments or different liquidity backstops.
Bitcoin experiences excessive volatility in each instructions: a selloff throughout the market, then a sharp rally as liquidity expectations shift.
The 2020 template is the clearest instance. Bitcoin fell from roughly $10,000 to $4,000 in mid-March, then climbed above $60,000 inside a yr because the Fed’s response flooded the system with liquidity.
The bullish argument for Bitcoin in credit score stress isn’t that Bitcoin is resistant to the preliminary shock, however that it could profit disproportionately from the coverage response.
| Regime | Credit move (your ranges) | What occurs in credit score | Policy signal to look at | Bitcoin sample (Phase 1 → Phase 2) |
|---|---|---|---|---|
| Slow bleed | HY +50–100 bps; BBB +20–40 bps | Incremental tightening; refinancing anxiousness rises slowly | No clear pivot; monetary situations grind tighter | Risk-off drag → little/no “liquidity flip” |
| Credit wobble | Reprice towards “policy-relevant” ranges (e.g., HY ~401 bps; IG ~106 bps episode) | Conditions tighten quick sufficient to vary the Fed dialog | Cuts pulled ahead; actual yields begin falling | Drop with threat → rebounds sooner than equities on pivot pricing |
| Credit shock | Gap wider to crisis-like ranges | Forced promoting, liquidity stress, market dysfunction threat | Facilities/backstops; balance-sheet-type actions | Sharp selloff → violent rally as liquidity regime turns |
What to look at
The dashboard for monitoring whether or not credit score stress flips from headwind to tailwind is simple. High-yield and BBB spreads are the primary line: if BBB widens disproportionately, the fallen-angel pipeline is getting priced.
CDX IG and CDX HY indices present a cleaner learn on market sentiment. US Treasury actual yields and the greenback collectively type the essential cross-check: rising actual yields and a rising greenback are the most poisonous combine for Bitcoin, whereas falling actual yields signal the potential coverage flip.
Liquidity plumbing, akin to any indicators of Fed amenities, balance-sheet enlargement, or repo operations, issues as a result of stablecoins and on-chain crypto liquidity react to financial shocks.
The credit score market is displaying each energy and warning lights. January opened with heavy investment-grade issuance and still-low threat premiums, suggesting investors are not but treating this as a 2020-style occasion.
But the $63 billion near-junk pipeline is a loaded gun.
If spreads keep contained, Bitcoin’s credit-stress narrative stays hypothetical. If the spreads hole, the sequencing issues: tighten the shock first, ease expectations later.
Bitcoin’s bullish case in a credit score deterioration situation isn’t that it avoids the primary section, however that it could capitalize on the second section sooner than property nonetheless tied to company money flows and credit score rankings.
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