(Kitco News) – Bitcoin’s (BTC) price showed some resilience in early trading on Friday amid a broad sell-off across financial markets that saw the prices of stocks, gold, silver, and oil plunge into the red amid fears the U.S. could be headed towards a recession.
The declines followed July’s U.S. jobs report, which came in far below expectations, with the labor market adding 114,000 nonfarm payroll jobs versus the 175,000 predicted by economists. The unemployment rate also rose unexpectedly to 4.3%.
While these statistics add support to calls for the Federal Reserve to lower interest rates in September, they also fed fears that the central bank has held interest rates too high for too long and has put the U.S. economy on the path to recession.
“While recent GDP and employment figures suggest underlying strength, concerns about a potential recession linger due to the elevated lending rates and unemployment,” said Jag Kooner, Head of Derivatives at Bitfinex. “The release of the jobs report has heightened these tensions.”
“The 4.3% figure could trigger the Sahm Rule, historically a reliable recession indicator,” he noted. “However, economists widely believe the rule might be less effective in the post-pandemic era due to unprecedented labour market dynamics.”
“Factors like increased labour force participation, particularly among immigrants, and the ongoing mismatch between job seekers and available positions have also contributed to the unemployment situation,” Kooner said. “These complexities, combined with an inverted yield curve – another recessionary signal – have created an atmosphere of uncertainty.”
He added that while layoffs have increased, “they remain historically low. The Federal Reserve, grappling with persistent inflation, has adopted a cautious approach, maintaining interest rates at elevated levels. However, the possibility of a rate cut in the near future is gaining traction as economic indicators show signs of softening.”
“If the unemployment number supports the FEDs view that inflation is coming under control, we can see a rate cut coming in September, making a bullish case for Bitcoin,” Kooner said.
“As for August, we are seeing a lack of liquidity in many assets and 'the summer' could be one of the reasons for it,” he concluded. “We are currently seeing significant buy walls being built at range lows on several Altcoins and we also expect the Bitcoin price to range between 61K to 70K, which will provide an accumulation zone.”
Amid Friday’s sharp sell-off, including declines over 2% for the S&P, Dow, and Nasdaq, Bitcoin’s price whipsawed, hitting a high of $65,510 before flash crashing to $62,365, at which point dip buyers jumped in and pushed it back above $63,600.
BTC/USD Chart by TradingView
At the time of writing, Bitcoin trades at $63,238, an increase of 0.59% on the 24-hour chart.
“The crypto market lost 0.75% in 24 hours to $2.29 trillion,” said Alex Kuptsikevich, senior market analyst at FxPro. “A day earlier, we noted a decline in cryptocurrencies in contrast to the positivity in equities on Wednesday, and then synchronized selling prevailed on Thursday.”
Kuptsikevich noted that their in-house sentiment index “remains at 57 (greed),” which he said is “bad news for the market right now, as a state of fear might have attracted buyers on downturns, but now they will wait for a bigger drawdown.”
“At the same time, the bulls in Bitcoin are leaving important levels behind them, having managed to push back from the 50-day moving average,” he observed. “The price change over the past 36 hours is small, but this result masks a 5.5% jump in price in the five hours after touching lows near $62.3K on Thursday night. Current levels fit into a corrective pattern from the July price amplitude.”
According to market analyst Kaleo, Bitcoin is likely to retest the lower bound of the range it has been trading in since February ahead of the U.S. Presidential election in November, and after that, it will resume its bull market uptrend.
#Bitcoin / $BTC
Retest the bottom of the channel.
Range through the election.
Rip when it's over. pic.twitter.com/uBLLCUFM3O— K A L E O (@CryptoKaleo) August 2, 2024
