Following a weaker-than-anticipated US labor market report, Bitcoin (BTC) has surged back into the mid-$61,000 range. This development has fueled optimism regarding the possibility of the Federal Reserve implementing multiple interest rate cuts before the conclusion of 2024.
❖ US Labor Apr Nonfarm Payrolls +175K; Consensus +240K
❖ US Apr Unemployment Rate 3.9%; Consensus 3.8%
❖ US Apr Average Hourly Earnings +0.20%, or +$0.07 to $34.75; Over Year +3.92%
❖ US Apr Private Sector Payrolls +167K and Government Payrolls +8K
❖ US Apr Average…
— *Walter Bloomberg (@DeItaone) May 3, 2024
In April, the US economy witnessed a modest gain of 175,000 jobs, falling short of the Wall Street consensus, which had anticipated an increase of 240,000 jobs. Additionally, the unemployment rate experienced an unexpected uptick, climbing to 3.9% instead of the anticipated 3.8%.
Consequently, according to data from the CME, the likelihood of the Federal Reserve implementing multiple interest rate cuts before the culmination of 2024 surged to approximately 62%, marking a notable increase from around 50% just one day prior. This shift in sentiment among traders, who are now betting more heavily on rate cuts for 2024, has exerted pressure on both US yields and the US dollar.
Reflecting this adjustment in market sentiment, the DXY, a measure of the US dollar against a basket of major currencies, retreated below 105 for the first time since April 10th. Moreover, US 10-year yields witnessed a decline, retracting to 4.5% from their previous level above 4.7% recorded just last week. Similarly, the 2-year yield experienced a dip, currently standing at 4.8%, down from above 5% merely three days ago.
These developments have contributed to an easing of financial conditions, thereby propelling the S&P 500 to its highest level in over two weeks, surpassing the 5,100 mark. Unsurprisingly, against this backdrop of improving macroeconomic conditions, bullish momentum has returned to the cryptocurrency market.
To break out of its recent downtrend, the Bitcoin price needs to push above $64,000 resistance. Source: TradingView
What Direction Is the Bitcoin Price Headed in Next?
The softer-than-expected US jobs data triggered a significant bullish response in both traditional financial markets and Bitcoin. Investors appear to have construed the data as suggesting a greater probability that the inflationary pressures observed in Q1 2024 will be transitory.
However, relying solely on one jobs report to make such an assumption is fraught with risk, especially considering that the report was not particularly weak.
TIMIRAOS SAYS US JOBS DATA NOT GAMECHANGER; NO 'UNEXPECTED' WEAKNESS
— *Walter Bloomberg (@DeItaone) May 3, 2024
The Federal Reserve reiterated earlier this week its stance to await further progress on inflation before considering any adjustments to interest rates. Despite this, markets appear to be preemptively pricing in the possibility of a faster rate cut trajectory, spurred by a marginally softer-than-anticipated inflation report. However, it’s crucial to exercise caution in drawing such conclusions based on a single data point, especially when the labor market indicators don’t signal significant weakness that could counteract inflationary pressures.
In this context, if markets are indeed jumping the gun, there’s a potential downside risk for the Bitcoin price. It’s imperative for Bitcoin traders to remain cognizant of recent outflows observed in spot Bitcoin ETFs, indicating a cautious sentiment among investors.
Furthermore, historical patterns suggest that post-halving rallies typically take between 4 to 6 months to materialize. Consequently, the near-term outlook for Bitcoin points towards a phase of consolidation, likely below the all-time highs registered in March.
Adding to the challenging landscape for Bitcoin, there exists formidable resistance around the $63,000 level, coinciding with the upper boundary of the current downward trend channel. If Bitcoin fails to breach this barrier, a scenario of continued descent towards the $53,000 support zone becomes increasingly probable. As such, Bitcoin traders must tread carefully, mindful of both short-term price movements and broader market dynamics.
The Bitcoin price remains wedged in a downtrend. Source: TradingView
Opportunity to Buy the Dip
A retest at this juncture presents an enticing opportunity for bulls to re-enter the market fray.
A potential decline to the low $50,000 range would signify a pullback of approximately 30% from the highs witnessed in March. Historically, during bullish cycles, Bitcoin pullbacks have typically not surpassed the 30% threshold by a significant margin.
Despite short-term fluctuations, the long-term fundamentals for BTC remain profoundly bullish. The pertinent question pertains not to whether the Federal Reserve will commence interest rate cuts, but rather to the timing of such actions. When interest rate cuts do materialize, they are poised to provide substantial tailwinds for the Bitcoin price.
Furthermore, the anticipated continuation of significant inflows into spot Bitcoin ETFs augurs well for the cryptocurrency’s long-term trajectory. Many institutional investors have yet to fully embrace Bitcoin, either remaining on the sidelines or proceeding with cautious due diligence. Notably, Wall Street behemoth BlackRock has assumed a prominent role in educating its clients on the advantages of investing in BTC. This educational outreach could potentially pave the way for increased institutional adoption of Bitcoin in the future.
Game theory says a country will print money to buy bitcoin
BlackRock knows this and is quickly orange pilling governments
their sales pitch is pretty easy:
if you're the first country to print money to buy bitcoin you'll be rich
if you're last, no one will trade you bitcoin… pic.twitter.com/PniQQJhMdc
— Crypto Tea (@CryptoTea_) May 3, 2024
As mentioned previously, it’s a common trend that significant post-halving effects typically manifest between 4 to 6 months following the halving event.
Consequently, the next substantial rally for Bitcoin may not materialize until later in the year. Hence, the current period presents an opportune moment for investors to consider employing a dollar-cost averaging (DCA) strategy to gradually accumulate the asset.
READ MORE ABOUT: Bitcoin Price Will Soon Hit $86K If This Happens
