Key takeaways:

Bitcoin recovered from its sharp sell-off from $107,000, suggesting it functions as a hedge against uncertainty for investors reacting to Moody’s recent downgrade of US debt.

Moody’s downgraded the US credit rating to Aa1, citing a $36 trillion debt and rising deficits, causing market turbulence and a spike in US Treasury yields.

Despite short-term pressure from macroeconomic shifts, Bitcoin’s long-term outlook remains bullish due to cautious shorting and a weakening US dollar.

Bitcoin (BTC) price faced a sharp 4% correction during the Asian trading session on May 19, tumbling from an “important level” as noted by Glassnode. The data analytics platform indicated that Bitcoin’s surge stalled just below $106,600, a critical level where 31,000 BTC are held. This supply cluster, formed on Dec. 16, 2024, reflects firm holder conviction, as investors have neither sold nor averaged down despite price fluctuations.

Bitcoin price cost basis chart. Source: Glassnode

The BTC price drop occurred after macroeconomic headwinds intensified, with a historic downgrade of the US credit rating by Moody’s and a rise in US Treasury yields, raising speculation around risk assets such as Bitcoin’s near-term trajectory.

Moody’s US credit downgrade spooks markets

After the US markets closed on May 16, Moody’s Investors Service downgraded the US credit rating from Aaa to Aa1, marking the first downgrade in modern history. Moody’s cited concerns over the US’s ballooning $36 trillion debt pile, with federal deficits projected to reach 9% of GDP by 2035, up from 6.4% in 2024.

Interest payments on US debt are expected to consume 30% of federal revenue by 2035, a significant rise from 18%. Following similar actions by S&P in 2011 and Fitch in 2023, this downgrade underscores the unsustainable fiscal path of the US, rattling investor confidence and contributing to market turbulence.

US 30Y treasury yields reached its highest level since Oct 2023. Source: Cointelegraph/TradingView

The downgrade also coincided with a surge in US Treasury yields, further impacting markets. The 10-year Treasury yield opened at 5.53% post-downgrade on May 19, while the 30-year yield followed a similar upward trend, currently at 4.98%, reflecting investor concerns over higher borrowing costs for the US government. 

The Kobeissi newsletter highlighted that historically, past downgrades led to mixed yield reactions—yields fell 35% after the 2011 S&P downgrade but rose 23% after Fitch’s 2023 downgrade. This time, the yield spike mirrors the 2023 pattern, signaling fears of inflation and fiscal strain, which likely contributed to Bitcoin’s price correction as investors sought safer assets.

Related: Bitcoin bulls should ‘be careful with longs’ as BTC price risks $100K breakdown

Will short-term pain shift to long-term gain for Bitcoin?

Bitcoin’s price dump on May 19 reflects its sensitivity to macroeconomic shifts. Bitcoin could face continued pressure in the short term as investors pivot to safer assets amid rising uncertainty and borrowing costs.

However, Bitcoin researcher Axel Adler Jr. on X highlighted a shift in market sentiment, noting that traders betting on price declines have been “significantly more cautious” in building short positions during this bull cycle compared to 2021. This suggests a generally bullish long-term outlook, as bears grow risk-averse.

Bitcoin Advanced Short/Long signals. Source: X.com

Historically, Bitcoin has served as a safe haven during economic turmoil, such as the COVID-19 crisis, and could benefit long-term from eroding trust in fiat systems, especially with the US fiscal outlook deteriorating.

The US Dollar Index (DXY) is signaling a potential decline below $100, reflecting a weakening dollar that has triggered a classic “risk-off” response. This shift has reignited interest in gold, which saw a modest 0.4% increase, though broader market reactions remain subdued. Typically, a weaker dollar bolsters risk assets like Bitcoin, as investors seek alternative stores of value. Adler Jr said,

“Overall, despite the prevailing “risk-off” sentiment (typically a headwind for high-volatility assets), Bitcoin may find itself in a relatively stronger position in the current environment due to its “digital gold” narrative and the supportive effect of a weaker dollar.”

Related: $107K fakeout or new all-time highs? 5 things to know in Bitcoin this week

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Key points:

BTC price action retargets $105,000 after the Wall Street open, rising 2.5% from the day’s lows.

Volatility continues, leading market participants to varying conclusions over what will happen to BTC/USD next.

Perspectives include the Bitcoin bull market being in its final stages.

Bitcoin (BTC) sought a rebound from a 4% dive at the May 19 Wall Street open as traders diverged on bull market strength.

BTC/USD 1-hour chart. Source: Cointelegraph/TradingView

$106,000 becomes BTC price zone to watch

Data from Cointelegraph Markets Pro and TradingView showed BTC/USD passing $104,500, up 2.5% from the day’s low.

The pair had seen flash volatility around the weekly close, which although the highest ever recorded swiftly saw bulls lose control.

Now, opinions differed about when, or if, new all-time highs would come.

“This is exactly what Bitcoin needs to be doing,” an optimistic Rekt Capital wrote in part of his latest X analysis.

“Needs to hold ~$104400 as support to position itself for a successful post-breakout retest.”BTC/USD 1-week chart. Source: Rekt Capital/X

Popular trader Daan Crypto Trades flagged $102,000 and $106,000 as the levels to watch above and below spot price.

“These mark the local range low and high and price has been trading within these for most of the last 1-2 weeks,” he explained in part of his own X post. 

“Keep an eye out for a clean break below either of these. So far, price has not sustained above or below for more than a day.”BTC/USDT perpetual contract 4-hour chart. Source: Daan Crypto Trades/X

The area around $106,000 was also on the radar for onchain analytics firm Glassnode.

“BTC’s price surge stalled just below $106.6K – a level with 31K $BTC held at that cost basis,” it observed on the day. 

“This supply cluster originated on Dec 16 and remains unshaken. Holders haven’t redistributed, nor averaged down – making $106.6K an important level to watch in the short term.”BTC supply cost basis heatmap. Source: Glassnode/X

Trader: “Too many bearish signs to ignore” on Bitcoin

A renewed warning meanwhile came from fellow trader Roman, who considered weekly timeframes to be no longer in bulls’ favor.

Related: $107K fakeout or new all-time highs? 5 things to know in Bitcoin this week

“Not a good close as we rejected resistance, created more bearish divergences, and have pumped with low volume. Stoch RSI has also topped,” he summarized. 

“Too many bearish signs to ignore, and it’s why I’ve been continuously saying the bull run is likely almost over.”BTC/USD 1-day chart with 1-week stoch RSI data. Source: Cointelegraph/TradingView

Roman referred to the stochastic relative strength index (RSI) indicator, a trend strength tool now firmly in “overbought” territory.

As Cointelegraph reported, various short-term BTC price predictions have surfaced in recent days, including an “early week” target of $116,000 along with a potential retracement toward $90,000.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Opinion by: Darius Moukhtarzadeh, Research Strategist at 21Shares

A new wave of crypto fundraising is emerging, changing how Web3 projects launch and who can invest at an early stage: Community Sales. At first glance, community sales may seem reminiscent of the ICO (Initial Coin Offering) era from 2016–2017. Yet, they represent a significant evolution that better aligns with crypto’s core values of democratization, transparency, and inclusivity.

Projects should include community sales as a core element of their fundraising strategy, besides raising from angel investors and VCs. Professional investors should embrace community sales as they highly increase the chances of sustainable success of Web3 projects. 

The ICO era

The original ICO boom promised broad retail participation and democratized investment opportunities previously reserved for well-connected insiders. The lack of clear regulatory frameworks led to widespread fraud, rug pulls, and market manipulation. This chaotic environment, rampant exploitation, and regulatory uncertainty eventually forced projects to abandon ICOs, shifting instead to private rounds accessible to well-connected angel investors and venture capitalists. 

Private funding problems

While private funding initially brought much-needed stability and credibility, it also introduced new problems. Over the past two years, many tokens have launched at excessively high FDVs (Fully Diluted Valuation) with a low circulating token supply. These tokens entered exchanges with the majority of supply locked and sky-high valuation, which did not meet the demand. Retail investors, attracted by initial hype, often became collateral damage. The result? Devalued tokens and damaged trust. Most of these tokens will most likely never recover. This market dynamic discouraged investments in new projects and undermined community-building efforts, weakening the overall sustainability of Web3 projects.

Airdrops as an unsustainable alternative

Airdrops appeared as another alternative, designed to distribute tokens widely and spark interest in the community for a project. Airdrops frequently fail to produce meaningful, sustainable engagement. Instead, they often became targets for Sybil attackers employing multiple accounts to maximize token gains or airdrop mercenaries hopping from one project to the next, quickly dumping tokens, depressing prices and undermining project credibility. Without genuine financial commitment and interest in the project beyond the airdrop, recipients had little incentive to hold tokens or participate actively in the community.

Community sales as the new cool kid on the block(chain)

Community sales represent a practical, strategic alternative to private funding and token airdrops, offering a structured way to engage retail investors meaningfully and transparently. Modern community sales on platforms like Legion and Echo feature robust regulatory frameworks, with thorough KYC and AML processes ensuring regulatory compliance and security. These inclusive fundraising opportunities require participants to make real capital commitments, even if modest, cultivating genuine stakeholder interest and reducing short-term speculation.

Recent: Blockchain needs efficient use cases for AI agents: X Spaces recap with VCs

One of the most significant advantages of community sales is their ability to democratize access. Investors gain entry under equitable terms, similar or sometimes superior to those previously reserved for venture capitalists. With minimum investments often as low as $100, community sales encourage broad participation, helping to build a genuinely decentralized and committed investor base. Investors who financially commit are far more likely to become long-term holders and active community members.

Win-win for projects, other investors, and the community

For Web3 projects, community sales offer profound benefits beyond immediate capital raising. Early community involvement leads to a more distributed investor base, reducing concentration risk and diverse future users. Projects with broadly distributed tokens consistently exhibit more stable prices, higher community activity, and healthier onchain engagement. 

Community sales significantly enhance a project’s market reputation. Embracing transparent, inclusive fundraising sends a clear signal to the market and prospective users — the project prioritizes collaboration and community involvement over the extraction of value. This transparency builds grassroots evangelism, drives organic growth, and creates a loyal community base committed to the project’s ongoing success. Professional investors should embrace community sales and actively encourage their portfolio companies to allocate to the community. 

The broader crypto market benefits substantially from a shift toward community sales. Projects that raise funds transparently and inclusively from their communities tend to attract more stable, supportive investor bases. This stability positively affects token markets, reducing volatility, restoring investor confidence, and accelerating broader adoption and integration of blockchain technologies into everyday financial services and applications.

Community sales represent far more than a revival of ICOs. They mark a mature approach, combining early crypto ideals with today’s regulatory clarity and technological possibilities. 

Projects committed to community sales position themselves for initial fundraising success, enduring market resilience, and community loyalty. The crypto ecosystem, founded on principles of decentralization and inclusivity, should embrace this model to fulfill its potential. Founders should, where possible, include the community when raising capital, as in the end, everyone wins: WAGMI.

The views and opinions expressed in this article are solely my own and do not reflect the views of my employer, 21Shares, or any affiliated organizations.

Opinion by: Darius Moukhtarzadeh, Research Strategist at 21Shares.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.