The cost to insure U.S. government debt against default has climbed sharply. That’s raising red flags not just for traditional markets, but for crypto investors too.
Credit default swaps (CDS) act like insurance. They allow investors to protect themselves if a bond issuer—in this case, the U.S. government—fails to pay back what it owes. Rising CDS prices mean rising fear. Right now, it costs over $51,000 a year to insure $10 million of U.S. Treasuries, up from just $29,000 six months ago. That’s not noise—it’s a warning.
Tariffs Trigger the Jump, But the Roots Run Deeper
The immediate trigger? President Trump’s April 2 “Liberation Day” tariffs on most imported goods, effective just three days later. Markets recoiled. Global investors worried about supply chain disruptions, higher prices, and retaliation from trading partners. Almost instantly, CDS spreads jumped. But the bigger story isn’t the tariffs. It’s America’s worsening fiscal health.
In early 2025, U.S. national debt crossed $36.5 trillion, pushing the debt-to-GDP ratio to around 124%. Interest payments alone ate up nearly 15% of federal revenue in 2024. Combine that with years of budget deficits averaging 6.2% of GDP, and you get a grim picture.
This isn’t just market noise – it’s a warning signal about America’s fiscal health. Here’s what’s happening and why it matters: pic.twitter.com/WydsHyROGl
— Ask Perplexity (@AskPerplexity) May 27, 2025
Meanwhile, Washington has hit a wall. A 19-day government shutdown, repeated debt ceiling standoffs, and the failure to pass meaningful fiscal reform have weakened trust. Unlike other AAA-rated countries, the U.S. appears politically unable to steer its financial course. That’s scaring investors—and it’s starting to show.
Why Crypto Investors Should Pay Attention
This spike in CDS isn’t just a government bond story. It could ripple through the crypto world too. When trust in traditional systems erodes, alternative assets like Bitcoin often get a second look. We’ve seen this play out before. During the 2023 regional banking crisis, Bitcoin jumped 25% in two weeks as faith in the U.S. financial system wavered. Now, with CDS signaling growing concern about America’s creditworthiness, crypto could once again become a hedge for investors seeking shelter from fiscal uncertainty.
The bond market’s protection mechanism against default risk, known as credit default swaps (“CDS”), which pay off in the event of a default, is flashing warning signs about U.S. Treasuries. The chart below shows CDS prices for U.S. Treasuries anticipating a six-level credit… pic.twitter.com/7Ze9c6ZJl8
— Porter Stansberry (@porterstansb) May 21, 2025
But there’s a catch. If U.S. debt worries lead to broader financial instability, crypto may also face pressure—especially if liquidity dries up. The same forces that drive Bitcoin higher during panic can also turn it volatile if cash gets scarce.
Looking Ahead
The message from CDS markets is sobering: without serious fiscal reform, confidence in U.S. solvency may continue to slip. For crypto investors, this is both a potential opportunity and a warning.
Disclaimer
The information discussed by Altcoin Buzz is not financial advice. This is for educational, entertainment, and informational purposes only. Any information or strategies are thoughts and opinions relevant to the accepted risk tolerance levels of the writer/reviewers, and their risk tolerance may differ from yours. We are not responsible for any losses you may incur due to any investments directly or indirectly related to the information provided. Bitcoin and other cryptocurrencies are high-risk investments, so please do your due diligence. Copyright Altcoin Buzz Pte Ltd.
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