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

U.S. consumers are borrowing at a slower rate due to rising credit card delinquencies.

Slower borrowing means the shift from fiat to crypto will remain limited, 10x Research said.

While the pullback from yen carry trading since Monday has likely paused, risk assets including bitcoin {{BTC}} have stabilized. Still, other risks, such as a slowdown in U.S. consumer lending, remain, according to Markus Thielen, founder of 10x Research.

Total credit debt rose by $8.9 billion in June, following a $13.9 billion upward revision in May, falling short of expectations for a $10 billion increase, according to data released by the Federal Reserve on Wednesday.

Revolving debt, which represents credit cards that allow borrowers to access funds up to a certain limit and repay the loan over time, fell by $1.7 billion, the most since the beginning of 2021. Non-revolving debt, which includes student tuition and auto loans, rose by $10.6 billion, the biggest increase in a year.

Perhaps more concerning are rising default rates, a sign that household balance sheets are deteriorating. In the June quarter, the share of credit card defaulters, or those who were more than 90 days late on their repayments, was 10.93%, the highest since Q1 2012. Meanwhile, auto loan defaults reached 4.43%, the highest since 2021.

That’s a sign that U.S. consumers are reaching the end of their borrowing capacity, according to Thielen, and challenges bullish rhetoric about cryptocurrencies.

“Weak U.S. consumer credit data, which fell from $11.3 billion to $8.9 billion (below the expected $10 billion), points to a collapsing personal savings rate driven primarily by rare negative credit card debt and rising defaults. This is important for crypto because it suggests that fiat-to-crypto migration will remain limited as U.S. consumers max out,” Thielen wrote in a note to clients.

Thielen also cited uncertainty surrounding the US election, a slowing US economy, and waning AI hype as risks for the crypto market. Nvidia (NVDA), a pioneer in both bitcoin and all things AI, bottomed out in late 2022 with the launch of ChatGPT.

NVDA shares reached a peak near $140 in June and have since fallen to $98, according to charting platform TradingView. Bitcoin was down 10% in seven days to change hands at $56,800 at press time, according to CoinDesk data.