Bitcoin Faces Risk from ‘Exhausted’ US Consumers, Says Analyst
Date: 2024-08-09 Author: Henry Casey Categories: CRYPTO PAYMENTS
US consumers are accumulating debt at a slower pace, amid rising credit card delinquencies. The slowdown in borrowing means the shift from fiat to crypto will remain limited, according to 10x Research.
While the halt in the yen carry trade has likely paused since Monday, stabilizing risk assets including Bitcoin (BTC), other risks remain, such as a slowdown in borrowing by US consumers, according to 10x Research founder Marcus Thielen.
Total debt increased by $8.9 billion in June after being revised up to $13.9 billion in May, missing the consensus forecast of $10 billion, according to data released by the Federal Reserve on Wednesday.
Revolving debt, which represents credit cards that allow borrowers to draw funds up to a certain limit and pay off the loan over time, fell by $1.7 billion, the largest decline since the start of 2021. Non-revolving debt, which includes student and auto loans, rose by $10.6 billion, the largest increase in a year.
More worrisome is the rise in delinquency rates, a sign of worsening household finances. In the June quarter, the share of credit card debtors more than 90 days late on payments was 10.93%, the highest since the first quarter of 2012. Meanwhile, delinquencies on auto loans reached 4.43%, the highest level since 2021.
This suggests that US consumers have exhausted their borrowing capacity, which poses a challenge to crypto bullish sentiment, according to Thielen.
“Weak US consumer lending data, which fell from $11.3 billion to $8.9 billion (below the $10 billion expected), largely due to rare negative credit card debt and rapidly rising delinquencies, signals a collapse in personal savings. This is important for crypto as it suggests that the shift from fiat to crypto will remain limited due to exhausted US consumers,” Thielen wrote in a note to clients.
Thielen also pointed to uncertainty surrounding the upcoming US election, a slowing US economy, and a decline in the hype around artificial intelligence as risks to the crypto market. Both Bitcoin and Nvidia (NVDA), the benchmark company for all things AI, have hit rock bottom with the debut of ChatGPT in late 2022.
NVDA shares peaked in June at around $140 and have since fallen to $98, according to charting platform TradingView. At press time, Bitcoin was trading at $56,800, down 10% in seven days, according to CoinDesk.
