Bitcoin's Next Major Move Hinges on a $63 Billion 'Fallen Angel' Signal That Most Investors Are Ignoring

Bitcoin’s price over the past year has closely followed net institutional demand, with recent developments highlighting this trend. In the last two months, a decline in the number of BTC holders has preceded a price rise, suggesting a shift in market behavior. The drop in exchange-held Bitcoin to a seven-month low has further reinforced this dynamic.

At the same time, corporate credit quality has deteriorated significantly beneath the surface of seemingly stable spreads. JPMorgan reported $55 billion in U.S. corporate bonds downgraded to junk status in 2025, while another $63 billion of investment-grade debt is now near the edge of that classification. These downgrades are creating a growing risk of forced selling among regulated funds and index trackers.

Spreads for investment-grade and high-yield bonds remain compressed by historical standards, masking the growing pipeline of potential downgrades. This creates a situation where Bitcoin could become a convex macro trade, depending on how credit stress evolves and whether it triggers broader liquidity interventions.

What Drives Bitcoin’s Next Move?

Bitcoin’s performance in the context of credit stress is two-stage. In the first phase, a widening of credit spreads typically tightens financial conditions and reduces risk appetite, which can weigh on Bitcoin’s price. In the second phase, if the stress becomes severe enough to trigger policy responses, such as Fed interventions or liquidity backstops, Bitcoin can benefit from the resulting shift in the monetary regime.

The Federal Reserve’s historical playbook in times of corporate credit stress includes balance-sheet expansions and direct market interventions. During the March 2020 crisis, for example, the Fed created the Primary and Secondary Market Corporate Credit Facilities, which helped to stabilize the bond market. If a similar scenario were to play out, Bitcoin would likely experience extreme volatility followed by a sharp rally as liquidity expectations shift.

What Are Analysts Watching Next?

The key metrics for tracking the evolution of credit stress include high-yield and BBB spreads, which are early indicators of market sentiment. CDX IG and CDX HY indices offer a cleaner read on market positioning. Treasury real yields and the U.S. dollar are also crucial because rising real yields and a strong dollar are typically bearish for Bitcoin.

Analysts are also watching for signs of liquidity plumbing changes, such as repo operations or Fed facilities, as these can have a direct impact on stablecoins and on-chain liquidity. If credit stress accelerates, and spreads widen enough to change the Fed’s policy path, Bitcoin could pivot from a risk-off asset to a liquidity-on asset more quickly than equities.

The current situation is still in a state of cautious complacency, with spreads remaining low despite the growing pipeline of potential downgrades. If spreads stay contained, Bitcoin’s credit-stress narrative will remain hypothetical. But if the spreads gap wider, the timing and sequence of the shock and the policy response will determine Bitcoin’s trajectory.

Bitcoin’s bullish case in a credit deterioration scenario is not based on avoiding the initial selloff, but on its ability to capitalize on the second phase faster than assets still tied to corporate cash flows and credit ratings. This distinction is critical for investors assessing the risks and opportunities in the current market environment.