Cryptocurrency prices corrected for a second day on Friday as the window to approve a spot Bitcoin (BTC) ETF opened but no approval was announced, prompting some traders to exit the market ahead of the weekend, when trading volumes are typically subdued.
Stocks climbed higher in the early trading hours after the release of the December jobs report, which showed the U.S. economy added 216,000 jobs in the final month of 2023 versus the expected 175,000, while the unemployment rate was unchanged at 3.7%. But the print gave traders reason to pause and reevaluate their expectations of an interest rate reduction early in 2024, which led to weakness in the market in afternoon trading.
At the closing bell, the S&P, Dow, and Nasdaq all managed to finish with slight gains, up 0.18%, 0.07%, and 0.09%, respectively.
Data provided by TradingView shows that Bitcoin bears attempted to take out support at $43,000, dropping the top crypto to a low of $42,500 before bull reinforcements arrived to push it back above $43,500. At the time of writing, BTC trades at $44,000, a decrease of 0.5% on the 24-hour chart.
BTC/USD Chart by TradingView
“January Bitcoin futures prices [were] down a bit in early U.S. trading Friday,” according to Kitco senior technical analyst Jim Wyckoff.
Bitcoin futures 1-day chart. Source: Kitco
“Bulls still have the overall near-term technical advantage as prices are not far below the recent contract high,” Wyckoff said. “However, a price uptrend on the daily bar chart has stalled out. Bulls need to show fresh power soon to revive the near-term price uptrend.”
According to analysts at QCP Capital, in the lead-up to the potential approval of the first spot Bitcoin ETF, “both BTC and ETH funding and futures have been very elevated. This started to happen in Q4 2023, but levels started to get really dislocated into 2024 (and particularly this week).”
“Perpetual swap funding rates on some exchanges like Deribit went above 100% (annualized) and the spot-futures basis also exploded,” they said. “The 1-month spread went as high as 30%! These are levels we only saw very briefly when BTC was at the 69k highs.”
The analysts noted that funding rates “normalized” and “forwards came off slightly after a deleveraging event on 3rd Jan.,” which many attributed to the circulation of a report from Matrixport that the SEC would deny all spot BTC ETF applications.
“For now, the topside remains capped by resistance at the 46 - 48.5k region with support at the 40.5 - 42k region,” the analysts said. “In spite of the leveraged washout, BTC has climbed back up to 44,000 level. While we remain wary of a ‘sell the news’ knee-jerk reaction to the downside, this resilient price action gives us more confidence in the medium-term bullish view into BTC halving towards Mar/Apr this year.”
The ETF hype has also resulted in crypto prices decoupling from TradFi markets, they said.
“Rates markets are pricing in 6 cuts for 2024 despite the Fed's dot plot projections of 3 cuts in 2024,” the analysts said. “Such aggressive pricing in the rates market can be unwound very quickly and turn into a macro risk-off if new data points point to a resurgence in strength in the job market or higher inflation, definitely a key macro risk to watch out for.”
Altcoin islands in a sea of red
It was a red day for the altcoin market as all but a dozen tokens in the top 200 recorded losses.
Daily cryptocurrency market performance. Source: Coin360
Powerledger (POWR) was the standout performer of the day, gaining 30.5% amid a sea of red, while Decentralized Social (DESO) climbed 13%, and Tellor (TRB) increased by 6.8%. Klaytn (KLAY) suffered the biggest loss, falling 20.1% to trade at 0.197, followed by a 13.5% decline for JOE (JOE), and a 12.8% loss for Treasure (MAGIC).
The overall cryptocurrency market cap now stands at $1.65 trillion, and Bitcoin’s dominance rate is 51.8%.
