Could a Government Shutdown Downgrade the US Credit Rating?
The US authorities shutdown is threatening to be a lengthy one, which can trigger score businesses to downgrade the nation’s credit score. This bearish sign would trigger chaos for TradFi, however a attainable alternative for Web3.
Specifically, businesses warned that additional impasse may harm the US’s credit standing. Prediction markets are presently somewhat assured that this shutdown will proceed for longer than the historic common.
Can Shutdowns Cause Credit Downgrades?
After a slender vote in Congress failed final night time, the US federal authorities entered a shutdown, with huge potential ramifications for the crypto market.
For instance, though TradFi shares went down, the crypto sector is feeling bullish, as the main tokens and common market cap have each risen healthily:
However, there’s one wild card at play right here that would show to be a actual stress take a look at for crypto’s use as a recession hedge.
Specifically, there are rising considerations that this shutdown may trigger score businesses to downgrade the US credit score. This transfer would compound ongoing losses from the chaotic incident.
How believable is that this state of affairs? Unfortunately, there are good causes to consider that one other authorities shutdown may trigger a credit score downgrade.
In 2023, Fitch cited a 2018 shutdown and different Congressional gridlock when it lowered the US’s credit standing. Moody’s did one thing similar in May 2025, cautioning the authorities that extra downgrades may observe:
“The score could possibly be [further] downgraded if coverage effectiveness or the power of establishments have been to erode to such a diploma that materially weakens the sovereign’s credit score profile. This can be the case if it have been to result in a deterioration in medium-term development or financial resilience to shocks, or if it was accompanied by a vital and lasting transfer by international buyers out of the US greenback,” Moody’s claimed in its final downgrade.
Granted, the score company didn’t explicitly cite authorities shutdowns as a part of its downgrade choice, however it actually looks like a believable subtext. Moreover, this incident may show significantly punishing.
Lengthy Deadlock and Crypto Opportunities
Specifically, analysts decided that the common US authorities shutdown solely lasted eight days. However, Trump’s 2018 impasse is a main outlier; at 35 days, it skewed the total information set considerably upwards.
Right now, as economists have noted, prediction markets consider that this shutdown will final two weeks or longer:
Of course, Polymarket isn’t always right, however it serves as a essential barometer for market sentiment. If a plurality of buyers consider that this shutdown will go far longer than common, it may additional spur a credit score downgrade.
This bearish sign may trigger any variety of downstream results.
All that’s to say, crypto’s high efficiency on the shutdown’s first day is a crucial indicator too. There’s a lot of controversy over how Bitcoin will fare in a longer recession, however now we have a vital alternative to collect some exhausting information right here.
If token markets proceed rising via a shutdown and a credit score downgrade, that might represent a robust sign that crypto might be a worthwhile recession hedge.
The submit Could a Government Shutdown Downgrade the US Credit Rating? appeared first on BeInCrypto.
