(Kitco News) – Cryptocurrency traders experienced a rare occurrence in early trading on Friday as prices held steady amid a pullback across financial markets after the latest nonfarm payroll (NFP) report showed the U.S. labor market added 272,000 jobs in May, blowing out economist expectations for 180,000 new jobs.
May also saw the unemployment rate increase from 3.9% to 4.0%, but that fact was overshadowed by the headline jobs number, which was also significantly higher than the 165,000 jobs added in April.
The response from the market was quick, with asset prices from gold and silver to Nvidia stock tumbling lower as investors took the report as the latest sign that the Federal Reserve may need to continue to hold interest rates higher for longer.
Prior to the NFP report, Naeem Aslam, Chief Investment Officer at Zaye Capital Markets, warned that if the data was strong, “we could expect the dollar index to rise as market players anticipate the Fed to maintain higher rates for a longer period.”
“However, this scenario may not be optimal for gold prices, as a strength in the dollar index often leads to a decline in both gold and Bitcoin prices,” he added. “However, Bitcoin has a strong correlation with riskier assets, so it can actually move higher as well, depending on what the market players take away from the US NFP data.”
Aslam’s views turned out to be quite prescient as the DXY surged 0.83% after the report was released while gold is down 2.5% on the session.
Data provided by TradingView shows that Bitcoin’s (BTC) price whipsawed in response to the report, spiking to $71,984 before pulling back nearly 2% to $70,583, only to return to support above $71,300 where it started the day.
BTC/USD Chart by TradingView
“Markets continue to fluctuate as sentiment swings between concerns about impending stagflation and optimism about potential economic stimulus,” said analysts at Ryze Labs. “Declining growth remains a concern, supported by weakening US economic data.”
“Last week, the Chicago PMI dipped to recessionary levels, the ISM manufacturing index neared contraction territory, and the Job Openings and Labor Turnover Survey (JOLTS) indicated weak employment and wages,” they added. “Notably, each release of poor economic data initially triggered a broad market sell-off, but this was short-lived and followed by a swift recovery, often surpassing previous levels. This suggests that market participants are increasingly optimistic that weak economic data will push Fed Chair Powell towards signaling dovishness and eventually enacting stimulus.”
“We are closely watching the Federal Open Market Committee (FOMC) meeting on June 12 for further clarity from the Fed, and we maintain our expectation that dovishness will follow,” Ryze Labs concluded.
Bitcoin ETF flows provide support
For those wondering what is offering support to Bitcoin amid the broader market turmoil, crypto analysts have pointed squarely to inflows into spot BTC exchange-traded funds (ETFs), with net inflows reaching a record-breaking 18 consecutive days on Thursday.
"The sideways drift from last week continued this week, with Bitcoin remaining within a 6% range from $66,400 to $72,000,” said Rachel Lin, CEO and co-founder of SynFutures. “Ethereum (ETH) followed a similar pattern, staying within a 5% range from $3,700 to $3,900. While the price movement does not reveal anything new, the week's biggest news has been the return of interest from TradFi institutions and investors. This renewed interest is evident in the increasing inflows into Bitcoin ETFs.”
“After several net outflow days in late April and early May, Bitcoin ETFs are now firmly back in bullish territory, with 18 consecutive net inflows,” she said. “The consistency and volume of these inflows suggest a change in sentiment.”
Lin noted that on Tuesday, “the second-highest inflow ever since the Bitcoin ETF's launch was recorded, with over $866 million in Bitcoin purchases, followed by $488 million the next day on June 5th. Currently, the total assets held by these ETFs have surpassed the previous high set in March 2024.”
Ether is also showing strength, which could be a positive sign for the broader altcoin market.
“The ETH-BTC pair continues to hover between the 0.054 to 0.056 range,” Lin said. “Despite substantial Bitcoin inflows, the absence of a significant breakdown in ETHBTC suggests that Ethereum is building a strong support base in this zone. With the anticipated launch of the Ethereum ETF, Ethereum is likely to start outperforming Bitcoin.”
“When we look at the options data, it indicates that market sentiment has remained relatively unchanged since last week, which is expected in a sideways market,” she noted. “Traders expect BTC to trade between $75,000 and $80,000 in June and Ethereum to trade between $4,000 and $5,000 during the same period. The put-call ratio reveals a solid bullish bias, with 65% calls and 35% puts.”
Considering all factors, Lin said “Ethereum and Bitcoin are forming bullish patterns on the weekly timeframe. They are hovering around the previous highs established in late February and are developing new support levels in this area. With increasing ETF inflows and an improving sentiment, the crypto market appears to be gearing up for another leg upward in the coming weeks."
At the time of writing, Bitcoin trades at $71,456, an increase of 0.22% on the 24-hour chart.
