(Kitco News) – Volatility persisted in the crypto market on Thursday as the day started with prices in a downtrend, only for the outlook to improve in the afternoon as Bitcoin (BTC) reclaimed support at $62,000 while some altcoins saw double-digit spikes.
“Bitcoin has bounced back from recent lows this morning and is poised to challenge its prior peak of $65,000,” said analysts at Secure Digital Markets. “The overall trading volume, encompassing spot and derivatives markets, has declined for the first time in seven months, falling by 44% to $6.58 trillion. This drop is attributed to rising geopolitical tensions and reduced investments into U.S.-listed spot ETFs, which have cast a shadow over the cryptocurrency market.”
Stocks rallied higher after the latest reading on unemployment claims came in at 231,000, an increase of 22,000 from the prior week and the highest level since August.
This shows that the labor market continues to cool, which many took as a positive sign that 2024 could still see one or more interest rate cuts despite the recent host of Fed officials repeating the possibility that interest rates will need to stay higher for longer, citing resistant inflation.
However, Bert Dohmen of Dohmen Capital Research said the recent sharp rise in the M2 money supply means the Federal Reserve won’t be able to deliver on expected interest rate cuts this year, and investors should start to prepare for that possibility.
Dohmen suggested the Fed is “stuck between a rock and hard place” as they are forced to finance record Treasury deficits while also continuing to fight stubbornly high inflation.
“The Fed is being forced to step on the accelerator to enable the financing of the record deficits at the US Treasury,” he said. “They know that is inflationary, but they have no alternative.”
At the close of markets, the S&P, Dow, and Nasdaq all finished in the green, up 0.51%, 0.85%, and 0.27%, respectively. The DXY fell 0.5% from the daily high amid the turnaround in markets, trading at 105.218 at the time of writing, while the U.S. 10-year Treasury yield fell 142 basis points from its daily high to 4.457%.
Data provided by TradingView shows that Bitcoin bounced off a daily low of $60,623 in the early morning and rallied 3.4% to hit a daily high of $62,663 before pulling back to support at $62,500.
BTC/USD Chart by TradingView
At the time of writing, BTC trades at $62,395, an increase of 1.15% on the 24-hour chart.
Miner selling puts pressure on Bitcoin
The post-halving reduction in Bitcoin’s emission rate is still working its way through the crypto market as miners struggle to cope with the decline in revenue.
“We’re seeing miners selling excess Bitcoin right now on the open market to help smooth out their earnings, which, in combination with a pause in global liquidity growth, is weighing on prices,” said Rennick Palley, founding partner at crypto venture capital firm Stratos, in a note to Kitco Crypto.
“Coming into this year, the market was expecting up to seven rate cuts. Now, it's only expecting one, which has yet to happen,” Palley noted. “Inflation has picked up again recently although we expect it to decline in the second half of the year.”
“While the Fed meeting last week was fairly dovish in light of recent inflation numbers, one thing that Powell did mention is a slowing of QT, which signals the beginning of the end of tight money policies,” he added. “But I think that's yet to really start to flow into the market.”
Palley suggested that with no other major positive catalysts on the horizon, the next leg up in the bull market will likely come when the Fed eventually decides to lower interest rates, though the timing is uncertain.
“With Bitcoin highly sensitive to liquidity flows, once the money printer turns back on, it's off to the races for Bitcoin,” he said. “Again, is that three months from now, or six months from now, not really sure, but given that it is an election year, I think it's highly likely that we see ourselves in a much more accommodative liquidity stance from the Fed in the next few months. And as a result, Bitcoin will continue to do well.”
According to market analyst Rekt Capital, the start of the next uptrend may already have begun as, “For the past year and a half, long downside wicks to end a more than -20% correction have often been the key to a future price reversal.”
The fact that “Bitcoin is still simply holding the Range Low as support, following the downside wick from last week,” suggests the bottom could be in, he added.
And even crypto bear il Capo of Crypto thinks Bitcoin could be forming a solid support base at the current level and may soon start to trend higher.
“After deviating below the range low, the price bounced, touched resistance, and is now retracing into an interesting support zone,” he tweeted. “This could be forming the first higher low.”
“There is strong demand at $59k-$61k and indicators look mostly bullish, so a bounce is likely,” he said. “If BTC breaks the $65k resistance, I'd be looking for $68k-$69k as the first target, and $74k-$75k as the second target. Bullish invalidation would be bearish PA at the previous liquidity zone.”
Altcoins start to climb higher
It was a mixed day of trading in the altcoin market, with a slight majority of tokens in the top 200 recording gains.
Daily cryptocurrency market performance. Source: Coin360
A trio of double-digit gainers led the field, with Akash Network (AKT), Livepeer (LPT), and Arweave (AR) seeing increases of 17.4%, 15.3%, and 11.9%, respectively. Render (RNDR) and Toncoin (TON) also recorded 11% gains. FTX Token (FTT) was the biggest loser, falling 7%, while Tellor (TRB) lost 5.4%, and GuildFi (GF) declined by 4.2%.
The overall cryptocurrency market cap now stands at $2.31 trillion, and Bitcoin’s dominance rate is 53.3%.
