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(Kitco News) - Financial assets from cryptocurrencies to stocks rallied on Friday as the latest U.S. jobs data showed the labor market remains strong, giving investors hope that the Fed may pause its interest rate hikes at the Federal Open Market Committee (FOMC) meeting next month.
Stocks were higher at the open, reversing the losses that followed this week’s 25 bps interest rate hike by the Fed and finishing the week on a positive note thanks in part to a strong recovery in regional banking stocks like PacWest, Western Alliance, and Zion. At the market close, the S&P, Dow and Nasdaq were well in the green, up 1.85%, 1.65%, and 2.25%, respectively.
Data provided by TradingView shows that after sliding lower throughout the morning session, Bitcoin's (BTC) price spiked higher in the afternoon, surging to a daily high of $29,780 before pulling back to support at $29,500.
BTC/USD Chart by TradingView
“Trading remains choppy and sideways in a range at higher levels,” Kitco senior technical analyst Jim Wyckoff wrote in his morning Bitcoin update. “The bulls still have the slight overall near-term technical advantage.”
Market analyst Michaël van de Poppe agreed with this sentiment and posted the following tweet noting that if BTC can hold above $29,100, there’s a good chance the bulls could attempt to push the top crypto to a new 2023 high in the coming weeks.
#Bitcoin holds $28,900 and breaks upwards, as $PEPE hits $1.5 billion market cap.
— Michaël van de Poppe (@CryptoMichNL) May 5, 2023
Things are heating up again.
As long as $29,100 holds, I think we'll see tests of the highs for #Bitcoin in the next week. pic.twitter.com/X8Hdc2gkTC
Bank struggles and debt ceiling
While cryptocurrency proponents are excited about the rising price of Bitcoin and the ongoing meme coin mania, investors in the broader financial markets are voicing concerns about several threats to economic stability, including the unfolding banking crisis and the threat of a default by the U.S. government as early as June of this year.
According to Mikkel Morch, chair and non-executive director at ARK36, “If the United States defaults it will be an event not only shaking the United States, but all financial systems and the entire world economy will see negative consequences far and wide.”
Morch said that a U.S. government default has the potential to negatively impact the price of Bitcoin and other cryptocurrencies as investors look to de-risk.
“However, when traditional banks fail and with them the slow, expensive, centralized payment systems that go along with them, more people could turn to decentralized finance and its cryptocurrency use cases,” he suggested. “That is exactly what we have seen in countries with large scale or government defaults, where people have indeed increased their migration to Defi and cryptocurrencies.”
Morch highlighted the rampant global inflation experienced over the past year, saying it only adds to this trend and suggesting that we could see an increase in “migration from traditional finance and USD to these new financial systems and currencies, including Bitcoin.”
“This is backed up by data showing that Bitcoin has again set a new positive record in daily transaction volumes which is an indicator that more and more people see BTC – and other cryptocurrencies - as practical payment tools and not just a store of value,” he said.
In order for DeFi and the cryptocurrency space in general to gain wider adoption, Morch said that increased integrations with traditional finance and more regulation to weed out bad actors are needed.
“As the cryptocurrency and Defi space grows, underlying technology, safety and speeds improve,” he said. “Altogether, the above is bound to create a more bullish sentiment for the area and in itself reinforce the asset space even further.”
Green shoots in the altcoin market
Select altcoins surged in price on Friday while the broader altcoin market trended higher, thanks in large part to the ongoing demand for meme tokens like Pepe (PEPE), which gained 88.11%, and Floki (FLOKI), which climbed 41.8% to close out the week.
Daily cryptocurrency market performance. Source: Coin360
Other notable performers include UMA (UMA) and SSV Network (SSV), which posted gains of 41.6% and 14.41% respectively, while Radicle (RAD), a top performer earlier in the week, suffered the biggest loss on the day with its price declining 20.9% to trade at $3.35.
The overall cryptocurrency market cap now stands at $1.22 trillion, and Bitcoin’s dominance rate is 46.9%.
