Bitcoin (BTC), the world’s first and largest cryptocurrency by market capitalization, has seen whipsaw price action since the release of a much stronger-than-expected US jobs report for September.
The blockbuster report showed the US economy adding 336,000 jobs last month, nearly double the median economist forecast for a gain of 171,000.
Those numbers underscored the ongoing strength of the US economy, which should bolster the case for 1) another interest rate hike from the US Federal Reserve (Fed) and 2) that the Fed should subsequently hold interest rates at higher levels for longer.
Unsurprisingly, US yields spiked higher across the curve, with the 10-year briefly nearing 4.9%, as traders bets on higher interest rates for longer, with this spike weighing on on crypto prices at the time.
Bitcoin dipped from the $27,700s prior to the data to as low as $27,200 in its immediate aftermath.
Higher yields on risk free assets like US government bonds reduce the incentive for investors to hold riskier and non-yielding assets, of which Bitcoin is (arguably) both.
However, as US yields have pulled back from earlier session highs (the 10-year was last under 4.8%), Bitcoin and the broader crypto market has enjoyed a strong recovery from intra-day lows.
BTC was last trading close to session highs and attempting to push through $28,000, up close to 3% from earlier session lows.
Why Did the Market Reverse?
The exact reason for the market’s reversal is unclear, but a few factors could be playing on investors minds.
Firstly, the latest US jobs report wasn’t strong across the board – the unemployment rate unexpectedly edged up to 3.8% from 3.7% and the MoM pace of wage gains was 0.2%, a little slower than the expected 0.3%.
Investors could have taken the view that the US jobs market isn’t quite as strong as the headline NFP number implied and that the market’s initial move was an overreaction, hence the subsequent reversal.
Alternatively, investors could be buying into the idea that the strong jobs numbers are actually bad for the economy’s longer-term outlook as they might encourage the Fed to hold interest rates at excessively high levels for too long, and could have been buying Bitcoin as a safe-haven against over-tightening from the Fed.
Of course, that’s all speculation.
What’s clear is that Bitcoin’s recent price action – holding above and rebounding from the $25,000s in recent weeks despite US yields hitting multi-decade highs – suggests the world’s largest cryptocurrency is becoming increasingly comfortable with higher interest rates.
While the broader macro picture (of a strong US economy with high interest rates) remains a long-term headwind for BTC, the prospect of a continued near-term grind higher shouldn’t be discounted.
Where Next for Bitcoin (BTC)?
Bitcoin is in a short-term uptrend, but for this uptrend to continue, BTC must break above a key resistance area that it is currently probing.
The cryptocurrency’s 200DMA sits just above $28,000, while $28,500 is a key resistance-turned-support-turned-resistance zone.
If Bitcoin can break above this key area, a retest of $30,000 becomes a strong possibility.
A quick surge beyond this psychological threshold and onto new yearly highs above $31,800 is difficult to forecast in the near-future when macro headwinds remain so high.
But the narrative may shift away from macro heading into 2024, which will see the likely approval of spot Bitcoin ETFs in the US (accelerating Bitcoin’s institutional adoption) and the halving (historically a bullish event).
The outlook for 2024 remains very strong, a view that Bitcoin options traders certainly seem to agree with.
As per data presented by The Block, the 25% delta skew of Bitcoin options expiring in 180 days remains strongly positive at around 5, suggesting investors continue to pay a premium for options that pay out in the case of Bitcoin price upside versus equivalent options that pay out in the case of Bitcoin price downside.
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