(Kitco News) – After holding steady during morning trading in the face of a blowout nonfarm payrolls (NFP) report, cryptocurrency prices trended lower in the afternoon as traders looked to reduce their exposure to markets amid growing uncertainty about the future of interest rates.
“Nonfarm payrolls rose by 272,000 in May, surpassing estimates of 182,000 and outpacing April’s figure of 165,000,” wrote analysts at Secure Digital Markets. “Despite the job gains, the unemployment rate edged up to 4%, exceeding forecasts of 3.9%.”
“Investors had been anticipating weak job figures that would justify Fed rate cuts, albeit not so bleak as to signal an impending recession,” they added. “The release of the jobs report follows the European Central Bank's decision on Thursday to cut rates for the first time since 2019, adding pressure on the Fed to possibly reconsider its policy stance. The Fed is slated to announce its decision on rates next week following its policy meeting on June 11-12.”
As a result of the unexpected data, “Bitcoin (BTC), stock, and bond markets have all experienced a slight downturn in response,” they said. “Initially, prices saw a brief uptick before reversing course, as the higher unemployment rate suggests a favorable outlook for the likelihood of another rate hike. The yield on the benchmark 10-year Treasury spiked by nearly 14 basis points to 4.43%.”
After a volatile day of trading, the major indices finished the day in the red, with the S&P, Dow, and Nasdaq losing 0.11%, 0.22%, and 0.23%, respectively.
Bitcoin briefly spiked to $72,000 as the NFP report was released, but lost support at $71,500 as the day progressed. The afternoon saw a cascading sell-off that dropped King Crypto to a low of $68,300 before dip buyers pushed it back above $69,100.
BTC/USD Chart by TradingView
At the time of writing, Bitcoin trades at $69,154, a decrease of 2.4% on the 24-hour chart. Spot gold is down 3.75% and trades at $2,288.10.
Short-term volatility, long-term uptrend
It remains to be seen if this is just a temporary pullback or the start of a longer downtrend as investors had been growing increasingly bullish before the surprise report.
In the lead-up to the NFP release, “The open interest for BTC surged to an all-time high of $37.66 billion,” Secure Digital Markets said. “This increase aligns with record inflows into spot Bitcoin ETFs and a bullish long-short ratio, reflecting positive market sentiment and anticipations of Bitcoin reaching new all-time highs in the coming weeks.”
“While a frothy market often signals an impending price correction, characterized by a leveraged speculative frenzy, so far, perpetual futures tied to most crypto pairs show no such indications,” they added. “This lack of speculative fervor suggests that the recent breakout above $70,000 could be more sustained than the one witnessed in March.”
Despite uncertainty about interest rates and rising geopolitical tensions, Bitcoin and the broader crypto market have been buffered by rising institutional adoption and the fact that many around the world are starting to see the asset class as a preferred store of wealth over fiat currencies.
The Bitcoin four-year cycle is also an influencing factor as the crypto market has a history of surging in value in the year following a Bitcoin halving, regardless of external forces attempting to halt the rally.
“Consensus seems to be that the top of the current cycle will be sometime in late 2025, with BTC reaching a high of 150k,” said Rennick Palley, founding partner at Stratos, in a note to Kitco Crypto. “There are outside estimates as high as 500k BTC by year-end 2025.”
“We expect a strong alt season getting started in the second half of 2024 lasting through 2025, albeit not necessarily of the same breadth as 2021,” he added. “Top sectors are likely to be memes, RWAs, AI, and modular blockchains including Ethereum L2s. We are also generally bullish on Solana and its ecosystem.”
According to Igor Telyatnikov, co-founder and CEO of AlphaPoint, “Based on historical data and patterns from previous cycles, we predict Bitcoin will reach a new all-time high (ATH) of $210,000 during this bull run.”
“Previous cycles saw Bitcoin’s price increase by 2,107%, 3,103%, and 631% after each respective halving,” he said in a conversation with Kitco Crypto. “Using these trends, we estimate a significant upward movement. The projected ATH is derived from analyzing past performance, with each cycle's price increase duration slightly extending each time.”
Telyatnikov said this projection “considers the cumulative effect of institutional adoption (ETFs crossed $15 billion in net inflows this week for the first time since going live in January), technological advancements (L2s provide scalability to the Bitcoin network), and regulatory clarity (FIT21 Act, Travel Rule, SEC rulings).”
As for how long the bull market will last, Telyatnikov noted that historical data “suggests that each Bitcoin cycle tends to last longer than the previous one, with increasing durations of 1,290 days, 1,403 days, and 1,438 days respectively, and ETFs likely impacting the extent of this current bull market.”
“Given this trend, we expect the current cycle to last approximately 1,500 days, extending into late 2025, with historical cycles indicating that higher prices are normally expected 6-18 months after halvings,” he said. “Enhanced market maturity and improved infrastructure contribute to the prolongation of each cycle.”
“External economic factors, such as inflation rates and macroeconomic stability, also play a crucial role in the cycle’s duration, with recent interest rate cuts prompting investors to buy into leverage and debt and global liquidity hitting a record high of $94 trillion,” he added.
Based on the various data points, Telyatnikov said they “predict the new ATH will be reached on October 11, 2025, which is 560 days after the April 19, 2024 halving.”
“This prediction is based on the patterns observed in the last three cycles, where ATHs were achieved 357 days, 511 days, and 546 days after their respective halvings,” he noted. “The slightly longer duration between the halving and the ATH in each cycle suggests a similar extension for the current cycle. This timeline aligns with the gradual maturation and stabilization of the market, influenced by growing institutional interest and adoption.”
As for what could halt the market rally and initiate the next crypto winter, Telyatnikov suggested that “Regulatory crackdowns or unfavorable legislation globally could dampen investor enthusiasm and trigger a downturn.”
Other possibilities include “A significant economic recession or financial crisis [that] could lead to a flight to safety, with investors pulling out of riskier assets like cryptocurrencies; Major technological vulnerabilities or hacks [that] could severely impact market confidence and lead to a prolonged bear market; or Over-leverage and excessive speculation that, if not corrected, could result in a sharp market correction, leading to a crypto winter similar to previous cycles.”
For now, crypto traders must contend with the volatility that post-halving periods are known for, and the best course of action may be to stay patient and try to bring a little levity to the situation.
Bitcoin $BTC plummeting to levels not seen since Tuesday! Stay safe folks ? pic.twitter.com/KfXLXcNUSv
— Barchart (@Barchart) June 7, 2024
While the chart provided by Barchart looks disastrous, corporate strategy professional Hamza Khalid provided a more macro view, noting that Bitcoin is “Still in an uptrend, respecting market structure,” and its “price action getting tighter between a resistance trend line and dynamic support (20 SMA).”
“Looks like it's getting ready for a breakout,” Khalid said.
Altcoins take a beating
Altcoins took a beating in the afternoon as traders exited the market ahead of next week’s CPI report, with all but a dozen tokens in the top 200 recording losses on the day.
Daily cryptocurrency market performance. Source: Coin360
Meme coin cat in a dogs world (MEW) and Highstreet (HIGH) were the two major exceptions, increasing by 26.5% and 17.8%, respectively, while RSS3 (RSS3) gained 6.5%. A meme coin also led the losers as BOOK OF MEME (BOME) fell 15.8%, while Aveo (AVEO) lost 15.7%, and Yield Guild Games (YGG) fell 13.7%.
The overall cryptocurrency market cap now stands at $2.55 trillion, and Bitcoin’s dominance rate is 53.7%.
