Bitcoin (BTC) has seen little upside momentum since Friday’s dismal U.S. nonfarm payrolls (NFP) release. Still, market sentiment remains positive, with weak data signaling an end of the Fed tightening.
“There’s no reason not to be bullish BTC,” Greg Magadini, director of derivatives at Amerdata, said in an email, citing Friday’s payrolls figure and the recent decline in stock market volatility indices as the likely catalyst for continued gains in the cryptocurrency.
The Labor Department’s closely watched employment report on Friday showed that job creation slowed to 150,000 jobs in October after rising by 297,000 in September.
Meanwhile, the jobless rate rose to 3.9% while wage growth, as measured by average hourly earnings, softened, hinting at continued disinflation.
The data has made it more likely that the Federal Reserve will not hike interest rates again, supposedly a positive development for risk assets, including cryptocurrencies. The central bank has raised rates by 525 basis points to 5.25% since March last year. The so-called tightening aimed at taming inflation was partly responsible for last year’s crypto market slide.
“This [NFP] print was also accompanied by revisions lower for both September (+336k→ +297k) and August (+227k → +165k). We’re also seeing decent progress on the CPI and hourly earnings trends, giving room for the Fed to speak in a continued dovish tone,” Magadini noted.
Supporting the case for continued upside in bitcoin is the dwindling volatility in the U.S. stock and bond markets. The S&P 500 VIX indicator has tanked from 21.13 to 14.19 in the past five trading days, while the MOVE index, an options-based measure of volatility in the Treasury bond market, has dropped from 132 to 118, according to charting platform TradingView. Perhaps tensions in the Middle East are no longer the focal point for the market.
Reduced volatility in traditional markets, especially bonds, alleviates liquidity stress in the global market, incentivizing risk-taking.
"The Middle Eastern war (something beyond my understanding) seems to have taken a backseat in terms of market-driving news. I expect a continuation of the relief rally for risk assets. Especially given the massive drop in VIX and VVIX week-over-week and the classic end-of-year rally narrative that traders look for in Q4," Magadini said.
Bitcoin changed hands at $34,890, representing a 0.4% decline on the day. Prices have gained nearly 25% in four weeks, reaching highs above $36,000 at one point.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is an award-winning media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. In November 2023, CoinDesk was acquired by Bullish group, owner of Bullish, a regulated, institutional digital assets exchange. Bullish group is majority owned by Block.one; both groups have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary, and an editorial committee, chaired by a former editor-in-chief of The Wall Street Journal, is being formed to support journalistic integrity.