Crypto Markets Analysis: Bitcoin, Ether Respond Positively to Falling Economic Data

Ether's price breaking above the upper range of Bollinger Bands is a hopeful sign; bitcoin appears poised to trade flat.

AccessTimeIconJan 4, 2023 at 9:10 p.m. UTC
Updated Jan 9, 2023 at 9:23 p.m. UTC

Bitcoin and ether prices responded positively to manufacturing and jobs data Wednesday as investors saw hopeful signs that the economy was contracting, a precursor to lowering inflation, which has bedeviled central bankers and analysts worldwide for more than a year and wounded asset markets of various stripes.

The two largest cryptocurrencies by market capitalization were recently up 0.8% and 3.3%, respectively, with bitcoin trading at about $16,800 and ether just over $1,250.

The Institute for Supply (ISM) Management’s Purchasing Managers’ Index for manufacturing fell to 48.4 in December, its second consecutive monthly decline. Readings below 50 indicate that the manufacturing sector is contracting.

And the U.S. Department of Labor’s Job Openings and Labor Turnover Survey (JOLTs) showed 10.46 million available jobs in November, better than analyst expectations reported to FactSet but down slightly from the previous month. It was the second straight monthly decline in the widely watched measure of job strength.

Many economists say that slowing job growth benefits risk assets because it signals that the economy is cooling and that inflation will likely wane.

At its most recent meeting in December, the Federal Open Market Committee (FOMC) reiterated its view that the jobs market was overheated, suggesting the economy was not braking fast enough to tame inflation.

Bitcoin and ether trade lower, then reverse

During the hour following the release of the two reports (15:00 UTC: 10 a.m. ET), a brief tug of war occurred between BTC buyers and sellers. Applying Bollinger Bands to BTC’s hourly chart shows a reduced price from its 20-period moving average, before reversing course into the following hour.

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BTC Hourly Chart 01/04/23 (TradingView)

Volume spiked during the hour, implying that trading activity was prodded at least partly by the economic news, and underscoring its relevance. Volume subsequently subsided in the following hour.

Applying Bollinger Bands to BTC’s daily chart, shows prices settling in above the 20-day moving average and approaching the upper range of the bands. The price range between daily high and low also expanded to its highest point in nearly 14 trading sessions.

A break above the higher Bollinger Band would be a bullish signal, but would likely need a stronger push of momentum. At the moment, this does not appear to be imminent.

Little evidence at this point indicates that BTC is poised to do anything other than continue trading in a range.

ETH appears to have more wind at its back at the moment, however.

Ether’s hourly chart shows similar activity, which is predictable given its tight correlation to BTC price moves. Volume spiked as well, with its trading range reaching its highest point since Dec 20.

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ETH Hourly Chart 01/04/23 (TradingView)

ETH momentum has risen, with a Relative Strength Index (RSI) reading of 57 versus BTC’s reading of 52. Additionally, ETH’s price breached the top range of its Bollinger Band during the 17:00 UTC (12:00 ET) hour.

Prices remaining above that range at the close of traditional U.S. trading hours would be bullish for the asset.


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Glenn C Williams Jr, CMT is a Crypto Markets Analyst with an initial background in traditional finance. His experience includes research and analysis of individual cryptocurrencies, defi protocols, and crypto-based funds. He owns BTC, ETH, UNI, DOT, MATIC, and AVAX

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