Bitcoin Faces Risk From ‘Maxed Out’ U.S. Consumers, Analyst Says

The total amount owed on credit rose by approximately 8.9 billion dollars in June, which was more than the anticipated 10 billion dollar increase and followed a previously adjusted 13.9 billion dollar rise in May, as per data unveiled by the Federal Reserve on Wednesday.

As someone who has navigated their way through student debt and credit card bills, I find the recent financial trends quite interesting. The decline in revolving debt, which for many of us represents credit card debt, is a promising sign that people are becoming more mindful of their spending habits. It’s been my personal experience that managing credit cards responsibly can help build a strong financial foundation. However, the surge in non-revolving debt, particularly in student tuition and auto loans, could be concerning for those starting out or facing multiple financial obligations. Balancing these different types of debt requires careful planning and budgeting, lessons I’ve learned the hard way over the years. It’s encouraging to see a decrease in one form of debt, but it’s essential that we continue to prioritize responsible borrowing and repayment across the board.

It might be worth noting that rising instances of delinquency could potentially signal a weakening financial situation for households. In the second quarter alone, approximately 10.93% of credit card users were either late or failed to repay their debts for over 90 days, which is the highest figure since the beginning of 2012. Additionally, auto loan delinquencies spiked to 4.43%, a level not seen since 2021.

According to Thielen, it suggests that American consumers have reached their limit for borrowing, which poses a difficulty for those who are optimistic about the future of cryptocurrencies.

As a researcher, I’ve observed a notable decline in U.S. consumer credit data, with the figure dropping from an anticipated $10 billion to $8.9 billion. This unexpected dip is largely attributed to uncommon negative credit card debt and escalating delinquencies, indicating a potential decrease in the personal savings rate. This trend could have a substantial impact on cryptocurrencies, as it seems that the fiat-to-crypto onramp may continue to be constricted due to financially stretched U.S. consumers, according to Thielen’s note to clients.

Thielen pointed out several potential threats to the cryptocurrency market, including doubts about the U.S. election results, a sluggish U.S. economy, and decreasing enthusiasm for artificial intelligence. Notably, both bitcoin and Nvidia (NVDA), often seen as a benchmark for AI advancements, experienced significant drops coinciding with the launch of ChatGPT towards the end of 2022.

Stocks of NVDA reached around $140 in June but have since fallen to $98 as per data from the charting platform TradingView. At the moment of reporting, Bitcoin was being traded at approximately $56,800, representing a decrease of 10% over the past week based on information from CoinDesk.