TLDR
- U.S. consumer debt accumulation is slowing down, with total credit increasing by $8.9 billion in June, less than expected.
- Revolving debt (credit cards) fell by $1.7 billion, the largest drop since early 2021.
- Credit card delinquency rates reached 10.93% in June, the highest since 2012.
- Auto loan delinquencies hit 4.43%, the highest since 2021.
- Slower borrowing and high delinquency rates may constrain the flow of money into cryptocurrencies.
Recent data from the Federal Reserve shows a slowdown in U.S. consumer borrowing, potentially impacting the cryptocurrency market.
In June, total credit outstanding increased by $8.9 billion, falling short of the expected $10 billion rise and down from May’s $13.9 billion increase.
The most notable change was in revolving debt, which includes credit cards. This category saw a decrease of $1.7 billion, marking the largest drop since early 2021.
On the other hand, non-revolving debt, covering student and auto loans, grew by $10.6 billion, the biggest increase in a year.
These figures paint a picture of changing consumer behavior. People are using their credit cards less, possibly due to caution about accumulating high-interest debt. At the same time, they continue to take on longer-term loans for education and vehicles.
Another concerning trend is the rise in delinquency rates. For credit cards, the share of borrowers more than 90 days late on payments reached 10.93% in the June quarter.
This is the highest level since the first quarter of 2012. Auto loan delinquencies also increased, hitting 4.43%, a peak not seen since 2021.
These high delinquency rates suggest that many U.S. consumers are struggling to keep up with their debt payments. This could be a sign of broader financial stress among households.
Markus Thielen, founder of 10x Research, believes these trends could have implications for the cryptocurrency market.
He suggests that as U.S. consumers reach their borrowing limits, there may be less money available to invest in cryptocurrencies. This could slow down the flow of traditional currency into the crypto market.
Thielen also points out other factors that might affect the crypto market. These include uncertainty about the upcoming U.S. election, a slowing U.S. economy, and decreasing excitement about artificial intelligence (AI) technology.
The connection between AI hype and crypto markets is interesting. Both Bitcoin and Nvidia, a company closely associated with AI development, saw their values bottom out when ChatGPT was introduced in late 2022.
Since then, Nvidia’s stock price has dropped from its June peak of $140 to $98. Similarly, Bitcoin’s value has decreased by 10% over the past week, trading at $56,800 at the time of writing.
These trends in consumer credit and related markets are important to watch. They could signal broader changes in the economy and impact various investment sectors, including cryptocurrencies.
It’s worth noting that economic data can be complex and subject to many factors. While these figures provide valuable insights, they are just one piece of the larger economic puzzle. Investors and market watchers will continue to monitor these trends closely in the coming months.
