The U.S. economy is entering turbulent territory as corporate bankruptcies surge past pandemic-era levels. With credit markets tightening and refinancing costs weighing heavily on businesses, attention is shifting toward alternative assets like cryptocurrencies. The link between financial distress and crypto adoption is becoming increasingly clear, raising questions about whether Bitcoin, stablecoins, and decentralized finance can act as liquidity outlets or whether they simply add another layer of risk in a fragile environment.
Corporate Bankruptcies Surge to Post-Pandemic Highs
In July alone, 71 large U.S. companies filed for bankruptcy, marking the highest monthly total since July 2020, when lockdowns and pandemic disruptions forced dozens of firms into default. Year-to-date filings have already reached 446, surpassing pandemic-era numbers and creating the busiest start to a year since 2010.
It’s official:
The US has now seen 446 LARGE bankruptcy filings in 2025, officially +12% ABOVE pandemic levels in 2020.
In July alone, the US saw 71 bankruptcies, marking the highest single-month total since July 2020.
What’s happening? Let us explain.
(a thread) pic.twitter.com/xIAbg4v3Lu
— The Kobeissi Letter (@KobeissiLetter) August 20, 2025
Industrials and consumer discretionary sectors remain under the heaviest strain, with 70 and 61 filings respectively. Healthcare has also been affected, recording 32 bankruptcies so far in 2025. In contrast, energy companies—supported by elevated commodity prices—have seen only four filings. Notably, several major consumer brands including Forever 21, Rite Aid, Joann’s, and Claire’s have returned to bankruptcy court, underlining how earlier restructurings failed to secure long-term stability.
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This surge is largely tied to refinancing pressures. Interest costs that accounted for just 9.1% of corporate net income in early 2024 have climbed rapidly as debt matured and rolled into a higher-rate environment. With credit markets tightening, defaults are rising—and the implications are spilling into crypto markets.
Credit Stress Meets Crypto Market Liquidity
The connection between corporate defaults and crypto is rooted in liquidity. As bankruptcies rise, credit availability in the broader economy contracts. Investors seeking yield and flexibility often turn to assets outside the traditional banking system, and crypto has historically benefited during such periods.
In 2020, when defaults surged, Bitcoin trading volumes and prices spiked as capital rotated into digital assets. The trend appears to be repeating. Spot Bitcoin ETFs have reported steady inflows despite corporate distress, suggesting institutional investors see crypto as a partial hedge against tightening credit conditions.
Inflation, Interest Rates, and Policy Gridlock
The Federal Reserve continues to walk a fine line. At its July meeting, policymakers held rates steady at 4.25–4.5%, the seventh consecutive pause. What made headlines was the internal division: two governors, Michelle Bowman and Christopher Waller, pushed for immediate rate cuts—the first such split in more than three decades.
The case for easing lies in weakening credit conditions and rising bankruptcy filings, particularly among small and mid-sized firms. But inflation pressures remain sticky. Producer prices climbed 0.9% in July, the sharpest rise since 2022, while core CPI hovered above 3%. Complicating matters further are tariff-driven costs, with the effective tariff rate now at 17.3%, the highest since 1935.
Markets remain cautious. Bond yields are elevated, credit spreads widened in July, and equity performance is increasingly concentrated in big tech stocks. Traders expect a rate cut in September, but the depth of future cuts remains uncertain. This gridlock leaves investors searching for hedges, with crypto assets once again in focus.
Small Businesses Bear the Brunt of Tightening Credit
Smaller firms are struggling the most. Data from S&P Global shows 43% of Russell 2000 companies were unprofitable at the end of 2024, surpassing levels seen during the financial crisis. Interest expenses for these firms jumped to 7.1% of total debt, the highest since 2003.
Since regional banks are cautious, bond markets are costly, and private credit favors larger borrowers, small and mid-sized businesses face shrinking financing options. This widening credit void is pushing investors to explore blockchain-based alternatives, from tokenized U.S. Treasuries to stablecoin settlements.
Blockchain Alternatives Gain Ground
Tokenized Treasuries have become one of the fastest-growing trends in 2025, surpassing $7.3 billion in value locked across platforms. Decentralized lending protocols like Aave and Maple Finance are managing billions in loans, while stablecoins such as USDT and USDC are handling trillions in monthly settlements.
For businesses, these tools offer liquidity and speed outside traditional banks. While adoption remains modest compared to the broader credit market, the momentum highlights crypto’s potential role as an alternative financial infrastructure during periods of stress.
ETF Approvals Fuel Institutional Momentum
Regulatory clarity is accelerating crypto’s integration into mainstream finance. The SEC recently introduced faster disclosure requirements for ETFs, cutting approval timelines dramatically. This shift has paved the way for a new wave of products, including proposed spot ETFs for Ripple’s XRP, Solana, Litecoin, and staking-enabled Ethereum.
Expectations are high. Analysts forecast imminent approvals for altcoin ETFs, while Polymarket data shows a 78% chance that an XRP ETF will be approved by year-end. Bloomberg places those odds even higher, at 95%. The launch of Solana’s first staking-enabled ETF has already drawn institutional capital, signaling strong demand for diversified crypto exposure.
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The Road Ahead for Crypto and the U.S. Economy
The U.S. economy now faces a challenging mix of rising bankruptcies, persistent inflation, and monetary policy uncertainty. For crypto, this environment represents both risk and opportunity. If inflation remains high and the Fed delays rate cuts, Bitcoin and other digital assets may gain appeal as hedges. If credit stress deepens, investor caution could slow inflows despite regulatory progress.
With the crypto market valued at nearly $4 trillion and institutional participation growing, the coming months will be defined by the interplay between economic stress, regulatory approvals, and shifting investor sentiment. The only certainty is volatility—and for crypto, that may mean heightened relevance as traditional markets struggle to absorb shocks.
