Bitcoin Makes a Comeback Above $60,000 Following Disappointing US NFP Data – Here’s Where BTC Is Headed Next
The price of Bitcoin (BTC) has surged back into the mid-$61,000 range after the release of a US labor market report that fell short of expectations. This has increased hopes that the Federal Reserve will cut interest rates multiple times before the end of 2024.
In April, the US economy added 175,000 jobs, which was below the expected gain of 240,000 jobs. Additionally, the unemployment rate rose to 3.9%, surpassing the expected 3.8%.
According to the CME, the likelihood of the Federal Reserve cutting interest rates more than once before the end of 2024 has risen to around 62% from 50% just one day ago. This has caused traders to increase their bets on rate cuts for 2024, leading to a decrease in US yields and the US dollar’s value.
The DXY, an index measuring the value of the US dollar against a basket of other currencies, has dropped below 105 for the first time since April 10th. Meanwhile, the 10-year US Treasury yield has fallen to 4.5% from over 4.7% last week, and the 2-year yield is currently at 4.8%, down from over 5% just three days ago.
Improving financial conditions have resulted in the S&P 500 reaching its highest level in over two weeks, surpassing 5,100. Consequently, the positive macroeconomic backdrop has injected bullish momentum back into the cryptocurrency market.
However, it remains uncertain whether the Bitcoin price can break out of its recent downward trend. To confirm a breakout, Bitcoin needs to surpass the $64,000 resistance level.
The next direction for the Bitcoin price is still unclear. While the softer-than-expected US jobs data has caused a bullish reaction in traditional financial markets and Bitcoin, it is risky to assume that this data alone indicates a temporary rise in inflationary pressures.
The Federal Reserve has stated that it will wait for further progress on inflation before considering interest rate cuts. It is possible that the markets are overestimating the impact of the slightly weaker inflation report and expecting a trend of labor market weakness that will lead to lower inflation and faster rate cuts.
If the markets are getting ahead of themselves, there is a risk of a Bitcoin price correction. It is important to note that spot Bitcoin ETFs have been experiencing outflows recently.
Additionally, post-halving rallies typically do not begin until 4-6 months after the halving event. Therefore, the short-term outlook for Bitcoin suggests consolidation below the all-time highs reached in March.
There is strong resistance in the $63,000s, which represents the top of the current downward trend channel. If Bitcoin fails to break above this level, it is likely to continue dropping towards the $53,000 support level.
However, a retest of the current levels could present an attractive opportunity for bulls to enter the market. A drop to the low $50,000s would indicate a 30% pullback from the March highs, which is within the normal range for Bitcoin pullbacks during bullish cycles.
Despite the short-term uncertainty, the long-term fundamentals for Bitcoin remain bullish. It is not a question of if the Federal Reserve will start cutting interest rates, but rather when. This will serve as a major catalyst for the Bitcoin price.
Additionally, spot Bitcoin ETFs are expected to attract significant inflows in the long run, and more institutions are likely to start buying Bitcoin as they become more educated about its benefits. BlackRock, a major Wall Street firm, is already taking on an educational role with its clients regarding Bitcoin investment.
Furthermore, post-halving tailwinds typically take effect 4-6 months after the halving event. Therefore, Bitcoin’s next major rally may not occur until later this year, making it an opportune time for investors to consider Dollar-Cost Averaging (DCA) into the asset.
Disclaimer: Cryptocurrency is a high-risk asset class. This article is provided for informational purposes only and should not be considered investment advice. There is a risk of losing all of your capital.
