(Kitco News) – Bitcoin (BTC) is trending higher in early trading on Friday after the latest jobs data showed that the U.S. labor market saw a notable slowdown in April, with hiring and wage growth slowing more than economists had predicted.
Data from the Bureau of Labor Statistics showed that the U.S. economy added 175,000 new jobs last month, far below the expected 240,000. At the same time, the unemployment rate rose to 3.9%, slightly higher than the anticipated 3.8%.
This report broke the streak of hotter-than-expected readings that have diminished hopes for interest rate cuts in 2024, sparking a rally across markets as investors took the data as a signal that a rate cut will come eventually.
The CME FedWatch tool shows that the market saw an increase in the odds of a rate cut in September to 72.6%, up from 61.6% yesterday, and 57.3% last week, but down from 93% last month.
“It has been a hectic past week in the markets,” said analysts at Ryze Labs. “Latest US data painted a gloomy picture – Q1 real GDP growth was reported at a weaker-than-expected 1.6%, compared to a consensus of 2.5%, marking the slowest pace of growth in two years. Core PCE, the Federal Reserve's preferred measure of inflation, rose 3.7% in Q1, surpassing expectations of 3.4% and significantly higher than Q4's 2%.”
“Globally, liquidity decreased by $86 billion last week to $171.38 trillion, mainly driven by a sharp fall in central bank liquidity and lower collateral values amidst rising bond volatility,” they added.
Ryze Labs noted that U.S. Treasury Secretary Janet Yellen helped ease concerns about rising long-term rates by keeping issuance on longer maturities unchanged in her Quarterly Refunding Announcement (QRA).
Addressing this week's FOMC meeting where the Fed held rates steady, they noted that Chair Jerome Powell announced a $35 billion per month taper to quantitative tightening and signaled that rate hikes are unlikely in the near future.
“With rate hikes off the table and markets already pricing in little to no cuts for 2024, we think that this bodes constructively for risk assets as the worst of stagflationary headwinds might be behind us,” the analysts said.
And following heavy outflows of $563.77 million from spot Bitcoin ETFs on Wednesday, Ryze labs said this indicates “substantial capitulation from weak holders,” which resulted in the funding rate on Bitcoin perpetual’s turning negative across most exchanges, “suggesting bearish positioning.”
“We think this setup could potentially lead to a short squeeze in the coming days,” they concluded.
The predicted short squeeze could have started in early trading on Friday as Bitcoin spiked from support at $59,000 to a high of $62,150. At the time of writing, King Crypto trades at $61,545, an increase of 4% on the 24-hour chart.
BTC/USD Chart by TradingView
“Bitcoin has been trading below the $60,000 mark for the first time since February, and various reasons have been posited for the dip,” said Neil Roarty, an analyst at Stocklytics. “These include the rising price of gold, and outflows from the same Bitcoin ETFs which drove its price upwards earlier in the year. But the truth may be as simple as retail investors booking some profits after an extraordinary surge in value.”
“This all led to a roughly 15 percent decline in the price of Bitcoin during April, but take a step back and the world’s most popular cryptocurrency has still more than doubled in value over the past seven months,” he added. “Where it goes from now will likely depend on broader economic factors, particularly interest rate cuts in the U.S. which, if they arrive later in the year as expected, would make ‘risk-on’ assets like Bitcoin look more appealing.”
According to legendary trader Peter Brandt, Friday’s rally higher could be a signal that a Bitcoin pump is ahead as its ability to hold support at $59,000 and move higher qualifies “as a very common bull market continuation chart construction.”
If Bitcoin can hold these lows and move higher the chart will qualify as a very common bull market continuation chart construction. $BTC pic.twitter.com/M8pBTUwszt
— Peter Brandt (@PeterLBrandt) May 2, 2024
And according to MN Trading Founder Michaël van de Poppe, this week's FOMC meeting marked the low for Bitcoin and the crypto market, and the altcoin bull market has started.
Terrible economic data -> $DXY down, additionally the case for QE and rate cuts will increase and therefore risk-on assets rally.#Bitcoin back to $61.6K.
FOMC was the low for the markets and altcoin bull market has started. pic.twitter.com/uVZxaYUwlM— Michaël van de Poppe (@CryptoMichNL) May 3, 2024
