Cryptocurrencies regained footing on Monday after a rocky start to the trading session, mirroring a broader recovery in risk assets as traders digested Moody’s downgrade of U.S. government bonds. Bitcoin BTC notched a strong rebound after slipping to as low as $102,000 early in the U.S. session, following its record weekly close at $106,600 overnight. The largest cryptocurrency by market cap climbed back to $105,000 in afternoon trading, up 0.4% over 24 hours. Ether ETH rose 1.2%, reclaiming the $2,500 level. DeFi lending platform Aave AAVE outperformed most large-cap altcoins, while the majority of the broad-market CoinDesk 20 Index members still remained in the red despite advancing from their daily lows. Solana SOL, Avalanche AVAX and Polkadot DOT were down 2%-3%. The bounce extended to U.S. stocks, too, with the S&P 500 and Nasdaq erasing their morning decline. The early pullback in crypto and stocks came after Moody’s late Friday downgraded the U.S. credit rating from its AAA status. The move rattled bond markets, pushing 30-year Treasury yields above 5% and the 10-year note to over 4.5%. Still, some analysts downplayed the downgrade's long-term impact on asset prices. "What does [the downgrade] mean for markets? Longer-term – really nothing," said Ram Ahluwalia, CEO of wealth management firm Lumida Wealth. He added that in the short term there might be some selling pressure centered on U.S. Treasuries due to large institutional investors rebalancing, as some of them are mandated to hold assets only in AAA-rated securities. "Moody’s is the last of the three major rating agencies to downgrade U.S. debt. This was the opposite of a surprise – it was a long time coming," Callie Cox, chief market strategist at Ritholtz Wealth Management, said in an X post. "That’s why stock investors don’t seem to care." Bitcoin targets $138K this year While BTC hovers just below its January record prices, digital asset ETF issuer 21Shares sees more upside for this year. "Bitcoin is on the verge of a breakout," research strategist Matt Mena wrote in a Monday report . He argued that BTC's current rally is driven not by retail mania, but by a confluence of structural forces, including institutional inflows, a historic supply crunch and improving macro conditions that suggests a more durable and mature path to fresh all-time highs. Spot Bitcoin ETFs have consistently absorbed more BTC than is mined daily, tightening supply while major institutions, corporations such as Strategy and newcomer Twenty One Capital accumulate and even states explore creating strategic reserves. These factors combined could lift BTC to $138,500 this year, Mena forecasted, translating to a roughly 35% rally for the largest crypto.
