Moody’s Names Cryptocurrency Market Crash as Top Risk of the Year

Moody's Analytics considers the cryptocurrency market crash as one of the most likely economic shocks over the next 12–18 months. The warning came two days before the Fed's rate decision, as investors face growing uncertainty due to inflation and the situation in financial markets.

In the latest risk matrix by Chief Economist Mark Zandi, 27 potential shocks are compared by probability and scale of impact. The possibility of a cryptocurrency market crash is near the top of the probability scale, but Moody's assesses the consequences for the real economy as relatively limited. Specific probabilities of a crash and price forecasts are not indicated in the table.

The warning emerged amid high borrowing rates, which complicate speculative investments. A deep correction in the stock market would increase pressure on cryptocurrencies, and leverage could accelerate losses during forced liquidations.

Moody's considers four risks more serious: the sell-off of stocks of companies related to artificial intelligence, escalation of the situation around Iran, turbulence in the bond market, and Fed's monetary policy errors.

Tension in the bond market is already noticeable: the yield on 10-year U.S. Treasury bonds recently reached 5.31%, and on Monday it fell to 4.99%. "The Fed will not raise the rate at this week's meeting, and it should not," Zandi wrote.

In September, the Fed raised the rate to 3.75–4% amid high inflation; analysts estimate the probability of another increase in October at 10.5%, according to CME FedWatch. For crypto investors, Wednesday's decision will be a test: maintaining the rate will provide a short respite, but persistent inflation and possible tightening later remain risks.