By Key Points
- Prediction markets expect a longer-than-average US shutdown
- Ratings agencies hint at downgrade risk from political gridlock
- Moody’s and Fitch have already lowered US ratings this year
- Crypto markets show resilience, suggesting hedge potential
The US government has entered another shutdown, and this time, it could have deeper economic consequences. Experts now warn that if the current political deadlock continues, a US credit downgrade could follow.
Fitch downgraded the US credit rating in 2023, citing political dysfunction, including the 2018 shutdown. Moody’s also issued a warning earlier in May 2025.
While neither agency named shutdowns directly as a reason, both emphasized that a prolonged lack of policy effectiveness could erode economic resilience and global investor trust.
According to Moody’s:
“A downgrade could follow if the strength of institutions erodes to a degree that materially weakens the sovereign’s credit profile.”
This warning now feels especially urgent, as lawmakers failed to pass a budget resolution, triggering the shutdown.
Crypto Reacts to US Shutdown. Source: CoinGecko – Techtokens
Prediction markets on
Prediction Markets Assess Shutdown Length. Source: Polymarket – Techtokens
Polymarket suggest this standoff could stretch well beyond the average length of eight days, possibly two weeks or more. That’s dangerously close to the 35-day record set in 2018.
The longer the shutdown drags on, the higher the likelihood of a US credit downgrade. If another downgrade happens, the United States could face higher borrowing costs, increased market volatility, and long-term damage to its financial credibility.
Government shutdown expected go to longer than 10 days, but less than 35 days. pic.twitter.com/piaCPl2qNO
— Joe Weisenthal (@TheStalwart) October 1, 2025
For retail investors, this may be the time to explore alternative financial tools like Bitcoin-backed loans offered by Coinbase, which are gaining traction in uncertain economic environments.
Crypto Markets Hold Strong, Can They Prove a Point?
While traditional finance (TradFi) reels from the uncertainty, the crypto sector is surprisingly upbeat. Bitcoin and major altcoins posted green candles as the shutdown took effect. Some analysts are calling this a critical moment for crypto, a chance to prove itself as a recession hedge.
If the US credit downgrade materializes, investors may begin looking for alternatives to the dollar and Treasury-backed assets. This could spark new flows into digital assets like Bitcoin and Ethereum.
Early price action reflects cautious optimism. Despite the shutdown’s negative impact on Wall Street, the total crypto market cap edged higher. This divergence may show that investors are testing whether crypto can serve as a buffer against centralized political failure.
Recent analysis also shows that Ethereum’s price is setting up for a potential breakout, a movement that could accelerate if macro uncertainty pushes more users into decentralized assets.
Of course, this test is far from over. If the shutdown persists and a downgrade follows, the crypto sector will be under the microscope.
Prediction markets, which serve as forward-looking indicators, expect more economic instability ahead. That could mean even stronger demand for crypto if digital assets continue to outperform during the chaos.
The longer political dysfunction continues, the more attention crypto may receive as a hedge. And if a US credit downgrade shakes the global economy, it may further validate Web3’s value proposition, especially as projects like Tron, under Justin Sun’s leadership, show the kind of long-term commitment that’s missing from government institutions.
Shutdowns, Ratings, and the Bigger Economic Picture
A US credit downgrade is more than a technical adjustment — it can trigger serious downstream effects. From interest rate hikes to investor panic, the financial system reacts quickly to any signal that the US government may not be as stable as once believed.
In 2011, S&P famously downgraded the US from AAA to AA+, and markets tanked. Treasury yields rose, and confidence dipped across global markets. While the economy recovered, the reputational damage was done.
The US government shutdown:
For the first time since 2018, the US is about to enter a government shutdown and investors are bracing for it.
This would furlough 750,000 workers PER DAY, costing ~$400M in daily compensation.
What does it all mean? Let us explain.
(a thread) pic.twitter.com/oewTTeOATc
— The Kobeissi Letter (@KobeissiLetter) September 30, 2025
In 2023, Fitch echoed similar concerns, pointing to “erosion of governance.” Now in 2025, the same pattern is repeating, and rating agencies are watching closely.
If the current shutdown stretches for several more weeks, that will test the patience of global investors. It could also hurt the dollar’s long-held reputation as the world’s safest asset.
This would make a US credit downgrade not just a political consequence, but a global economic shock.
Meanwhile, crypto is positioning itself as an alternative system. The shutdown and its fallout could become the ultimate stress test for Web3, and if digital assets continue to gain during this uncertain time, it might mark a shift in how investors manage macro risk.
Interestingly, while the macro outlook worsens, crypto-native trends like AI-driven Web3 companies are thriving, offering a different type of resilience not seen in traditional sectors.
And even volatile assets like Jupiter (JUP) are attracting speculators, as JUP recently dropped 78% but shows strong rebound signals, highlighting the risk appetite that still exists in the crypto space despite broader economic gloom.
What is your reaction?
