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Bitcoin (BTC), the world’s first and largest cryptocurrency by market capitalization, has seen strong price movements since the release of a US jobs report for September that came in much stronger than expected.
The blockbuster report showed the U.S. economy added 336,000 jobs last month, nearly double the average economic forecast of 171,000 jobs.
These numbers underscore the continued strength of the US economy, which suggests that 1) the US Federal Reserve (Fed) will raise interest rates again and 2) the Fed should then keep interest rates higher for longer.
Unsurprisingly, U.S. yields jumped across the curve, with the 10-year note briefly approaching 4.9 percent, as traders bet on higher interest rates for a longer period of time, with this rise leading to this point in time weighed on crypto prices.
Bitcoin fell from $27,700 before the data to as low as $27,200 immediately after.
Higher yields on risk-free assets like U.S. Treasury bonds reduce the incentive for investors to hold riskier, non-returning assets, of which Bitcoin is (arguably) both.
However, as US yields have retreated from previous session highs (the 10-year yield was last below 4.8%), Bitcoin and the broader crypto market saw a strong rebound from intraday lows.
BTC last traded near session highs and attempted to break through the $28,000 mark, up nearly 3% from previous session lows.
Why did a market reversal occur?
The exact reason for the market turnaround is unclear, but a few factors could be at play for investors.
First, the latest US jobs report was not entirely positive – the unemployment rate unexpectedly rose to 3.8% from 3.7%, and the pace of month-on-month wage gains was 0.2%, slightly slower than the 0.3% expected.
Investors may have come to the conclusion that the US labor market is not quite as strong as the NFP headline suggested and that the market’s initial move was an overreaction and hence the subsequent reversal.
Alternatively, investors may believe that the high employment numbers are actually bad for the economy’s longer-term prospects, as they could prompt the Fed to keep interest rates at excessively high levels for too long, and may have bought Bitcoin as a safe-haven counterpart against excessive tightening by the Fed.
Of course, this is all speculation.
It’s clear that Bitcoin’s recent price action – which has held above and rebounded from the $25,000 mark in recent weeks even as US yields have hit a decade-long high – suggests that the biggest The world’s cryptocurrency is increasingly comfortable with higher interest rates.
While the broader macroeconomic picture (a strong US economy with high interest rates) continues to be a long-term headwind for BTC, the prospect of further near-term increases should not be discounted.
What’s next for Bitcoin (BTC)?
Bitcoin is in a short-term uptrend, but for this uptrend to continue, BTC will need to break through a key resistance area that it is currently exploring.
The cryptocurrency’s 200DMA is just above $28,000, while $28,500 represents a key resistance, support, and resistance zone.
If Bitcoin can break through this key area, a retest of $30,000 is quite possible.
A rapid rise beyond this psychological threshold and to new annual highs above $31,800 is difficult to predict in the near term if macro headwinds remain so strong.
But the narrative may shift from macro to 2024, when spot Bitcoin ETFs will likely be approved in the US (accelerating Bitcoin’s institutional adoption) and the halving (historically a bullish event) will occur.
The outlook for 2024 remains very positive, a view that Bitcoin options traders appear to agree with.
According to data presented by The Block, the 25 percent delta skew of Bitcoin options expiring in 180 days remains strongly positive at around 5, suggesting that investors continue to pay a premium for options that expire in the event of a Bitcoin -Price increase, compared to equivalent options that pay out in the event of a Bitcoin price decline.
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