The US authorities shutdown is threatening to be a protracted 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.
Particularly, businesses warned that additional impasse might injury the US’s credit standing. Prediction markets are at present moderately assured that this shutdown will proceed for longer than the historic common.
Can Shutdowns Trigger Credit score Downgrades?
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After a slender vote in Congress failed final night time, the US federal authorities entered a shutdown, with enormous potential ramifications for the crypto market.
For instance, despite the fact that TradFi shares went down, the crypto sector is feeling bullish, because the main tokens and common market cap have each risen healthily:
Crypto Reacts to US Shutdown. Supply: CoinGecko
Nevertheless, there’s one wild card at play right here that might show to be an actual stress check for crypto’s use as a recession hedge.
Particularly, there are rising issues that this shutdown might trigger score businesses to downgrade the US credit score. This transfer would compound ongoing losses from the chaotic incident.
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The US authorities shutdown:
For the primary time since 2018, the US is about to enter a authorities shutdown and traders are bracing for it.
This might furlough 750,000 staff PER DAY, costing ~$400M in every day compensation.
What does all of it imply? Allow us to clarify.
(a thread) pic.twitter.com/oewTTeOATc
— The Kobeissi Letter (@KobeissiLetter) September 30, 2025
How believable is that this state of affairs? Sadly, there are good causes to consider that one other authorities shutdown might trigger a credit score downgrade.
In 2023, Fitch cited a 2018 shutdown and different Congressional gridlock when it decreased the US’s credit standing. Moody’s did one thing related in Might 2025, cautioning the federal government that extra downgrades might comply with:
“The rating could be [further] downgraded if policy effectiveness or the strength of institutions were to erode to such a degree that materially weakens the sovereign’s credit profile. This would be the case if it were to lead to a deterioration in medium-term growth or economic resilience to shocks, or if it was accompanied by a significant and lasting move by global investors out of the US dollar,” Moody’s claimed in its final downgrade.
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Granted, the score company didn’t explicitly cite authorities shutdowns as a part of its downgrade determination, but it surely definitely looks like a believable subtext. Furthermore, this incident might show notably punishing.
Prolonged Impasse and Crypto Alternatives
Particularly, analysts decided that the common US authorities shutdown solely lasted eight days. Nevertheless, Trump’s 2018 impasse is a significant outlier; at 35 days, it skewed the whole knowledge set considerably upwards.
Proper now, as economists have famous, prediction markets consider that this shutdown will final two weeks or longer:
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In fact, Polymarket isn’t at all times proper, but it surely serves as an important barometer for market sentiment. If a plurality of traders consider that this shutdown will go far longer than common, it might additional spur a credit score downgrade.
This bearish sign may trigger any variety of downstream results.
All that’s to say, crypto’s excessive efficiency on the shutdown’s first day is a vital indicator too. There’s a variety of controversy over how Bitcoin will fare in an extended recession, however we’ve got a important alternative to collect some exhausting knowledge right here.
If token markets proceed rising by a shutdown and a credit score downgrade, that might represent a robust sign that crypto will probably be a priceless recession hedge.
