(Kitco News) – Volatility spiked across financial markets on Friday as investors evaluated the impact of the latest jobs data on the outlook for interest rate cuts, while the ‘too-close-to-call’ Presidential election in the U.S. had many traders exiting to the sidelines until the outcome is known.
Also contributing to the volatility was the October jobs report, which came in significantly below expectations, registering 12,000 new jobs for the month versus an expected 100,000.
“This represents the lowest job creation figure since December 2020, maintaining the unemployment rate at 4.1%,” noted analysts at Secure Digital Markets. “However, traders appear to be largely dismissing the weak job data, attributing it to the impact of recent hurricanes and a strike at Boeing.”
According to the CME FedWatch Tool, the odds of a 25 basis point cut at next week’s FOMC meeting now stand at 98%, while the odds of another 25 bps cut in December stand at 82%.
Stocks responded positively to the developments as interest rate cuts are seen as favorable for equities. The early gains moderated in the afternoon, but the S&P, Dow, and Nasdaq all finished in the green, up 0.41%, 0.69%, and 0.80%, respectively.
The yield on the U.S. 10-year Treasury spiked to 4.386% amid the rising odds of interest rate cuts, which put pressure on the ‘safe-haven’ assets.
Gold initially trended higher following the jobs report but reversed course after spiking above $2,760/oz. At the time of writing, spot gold trades at $2,735.50/oz for a decline of 0.29% on the session.
Analysts have warned that the non-stop rally to new highs has pushed the yellow metal into overbought territory, so a correction into consolidation is expected.
Data provided by TradingView shows that Bitcoin (BTC) whipsawed in trading on Friday, spiking to a high of $71,622 after the jobs report was released before plunging to $68,742 as traders sold their positions ahead of what is expected to be a volatile week surrounding the presidential election.
BTC/USD Chart by TradingView
“Today’s trading session saw Bitcoin prices retreat by over 2% from the morning peak of $71,600 to $69,000, with the cryptocurrency market's overall cap shrinking by 6% within the same period,” Secure Digital Markets analysts said. “This downturn led to the liquidation of approximately $250 million in bullish positions, reflecting broader market uncertainties.”
“Factors potentially influencing this dip include a shift in the betting odds against Trump's election victory on Polymarket, rising geopolitical tensions between Iran and Israel, and lackluster earnings reports from tech giants like Microsoft and Meta,” they added. “Notably, short-term Bitcoin holders transferred roughly $2.3 billion worth of the cryptocurrency to exchanges at a loss on Thursday, following a price drop below $70,000 after nearing record highs earlier in the week.”
“As we approach the U.S. elections slated for November 5, market volatility is expected to remain high,” the analysts underscored. “Traders are also keenly awaiting the Federal Reserve's interest rate decision on November 7, anticipating a 25 basis point reduction.”
At the time of writing, Bitcoin trades at $69,184 for a loss of 1.97% on the 24-hour chart.
Bull market to resume after the election
Bitcoin’s retreat after its failed attempt to set a new all-time high is nothing new, noted market analyst Kaleo.
“When Bitcoin retested its previous ATH near $20K in late 2020, it didn't immediately rip past it,” he highlighted in a post on X. “It initially pulled back on a quick wick nearly 20% (Thanksgiving 2020 was a Black Friday sale, especially for alts), and accumulated in a range for 30 days prior to breaking out. The breakout happened 219 days after the May 2020 halving.”
“We're in a similar spot now, retesting the ATH almost 200 days post-2024 halving,” he said. “A little bit of a pullback here isn't any reason for concern. You'll probably feel it the most in your alts, but those will also be the ones that rip back the hardest.”
“More than anything now is the time to position yourself for the move up that's coming and to make sure you're NOT in a position where a pullback will shake you out prior to that move,” Kaleo said. “This is still the calm before the storm. Be more bullish.”
He added that while a 20% correction is not certain, traders should keep it in mind so they are not caught off guard if it does happen. “Don’t play with leverage here and put yourself in a position where you could get shaken out if it does happen,” he warned. “Just keep stacking and be more bullish.”
And citing the rally to new all-time highs for gold, Kaleo said, “Also, if you don't think Bitcoin is about to mimic/outpace what we've seen so far from gold, you're crazy.”
Market analyst TechDev supported this bullish outlook, highlighting that the Bitcoin chart is flashing a setup that hasn’t been seen in eight years, historically followed by a rally higher.
Technical analyst HornHairs noted that similar moves to derisk were seen ahead of the previous two elections, only to see Bitcoin’s price surge higher without looking back once the votes were counted.
John Glover, Chief Investment Officer at Ledn, sees the pullback as temporary and expects another breakout attempt from bulls leading into the election.
“We tested the all-time highs this week, and when I break down wave 5 (yellow line) of the larger Wave III (orange line) into its five wave count (green line), I expect another test of the $74k level before the election,” he said in a note to Kitco Crypto. “After that, the short-run direction will be determined by the election outcome.”
“With a Republican win, I expect a quick jump up to circa $82k followed by a period of sideways-to-lower trading back into the $68-72k area before we make the push to complete the larger 5 Wave pattern at or above $100k in Q2 of next year,” he added. “A break and close below $63k would signify the completion of Wave III, which could open up the potential for a correction down to $55-62k, but that is not my preferred count.”
And André Dragosch, Head of Research at Bitwise, said he expects prices to trend higher once the dust kicked up by the election settles.
“November has historically been the best performance month for Bitcoin on average, which is why the positive trend in October should most likely repeat itself this month,” he wrote. “In this context, we also expect that the US election could become an important catalyst for the market, and regardless of the final election outcome, Bitcoin and other cryptoassets are poised to perform very positively over the coming months, as shown in our Chart-of-the-Month.”
“In October, market focus shifted from Fed policy to global reflation efforts, especially as China implemented measures to boost its economy, countering the Fed's rate cuts,” Dragosch noted. “Rising US Treasury yields and a stronger dollar created headwinds for Bitcoin, with elevated US debt and fiscal sustainability concerns prompting investors to turn to hard assets like Bitcoin and gold as potential reserve assets.”
“Despite potential recession indicators, Bitcoin's scarcity and institutional interest are projected to support its role as a hedge, especially if dollar appreciation and yield increases subside due to economic strain,” he concluded.
Altcoins tumble amid Bitcoin pullback
Altcoins fell alongside Bitcoin on Friday afternoon, with the majority of tokens in the top 200 recording losses.
Daily cryptocurrency market performance. Source: Coin360
Goatseus Maximus (GOAT) bounced back from its negative performance over the past two days to lead the gainers with an increase of 9.6%, while OriginTrail (TRAC) climbed 7.7%, and Arkham (ARKM) gained 5.5%. Immutable X (IMX) fell 13.6% to lead the losers after the project received a Wells notice from the SEC, while First Niero on Ethereum (NEIRO) lost 8.6%, and Pyth Network (PYTH) declined by 6.5%.
The overall cryptocurrency market cap now stands at $2.32 trillion, and Bitcoin’s dominance rate is 58.8%.
