Bitcoin (BTC), the world’s first and largest cryptocurrency by market capitalization, has seen significant price action since the release of the U.S. jobs report for September that was much stronger than expected.
The blockbuster report showed the U.S. economy added 336,000 jobs last month, nearly double the median economist forecast of 171,000 jobs.
These numbers highlight the continued strength of the U.S. economy, which should support the case for: 1) the Fed to raise interest rates again; and 2) that the Fed should then keep rates higher for longer.
As expected, Treasury yields surged across the curve, with the 10-year yield briefly approaching 4.9% as traders bet that rates would stay that way for longer, a surge that weighed on cryptocurrency prices at the time.
Bitcoin fell from $27,700 before the data was released to $27,200 after the data was released.
Higher yields on risk-free assets like U.S. government bonds reduce investors’ incentive to hold risky and non-yielding assets, while Bitcoin (arguably) offers both.
However, as U.S. yields retreated from earlier highs (the 10-year yield was recently below 4.8%), Bitcoin and the broader crypto market recovered strongly from intraday lows.
BTC last traded near the session high and attempted to move above $28,000, gaining nearly 3% from its earlier session low.
Why did the market reverse?
The exact reasons for the market reversal are unclear, but there are a few factors that investors may consider.
First, the latest US jobs report was not strong overall - the unemployment rate unexpectedly rose from 3.7% to 3.8%, and wages increased by 0.2% month-on-month, slightly lower than the expected 0.3%.
Investors may believe that the U.S. job market is not as strong as the headline nonfarm payrolls data suggests and that the market's initial move was an overreaction, hence the subsequent reversal.
Alternatively, investors may come to believe that strong employment data are actually bad for the economy’s long-term prospects because they may encourage the Federal Reserve to keep interest rates too high for too long, and may buy Bitcoin as a safe haven asset against excessively tight Fed policy.
Of course, this is all speculation.
What’s clear is that Bitcoin’s recent price action — which has held above $25,000 and rebounded in recent weeks despite U.S. yields hitting multi-decade highs — suggests the world’s largest cryptocurrency is increasingly comfortable with higher interest rates.
While the broader macro picture (a strong U.S. economy and high interest rates) remains a long-term headwind for Bitcoin, the prospect of a sustained move higher in the near term should not be underestimated.
Where is Bitcoin (BTC) Next?
Bitcoin is in a short-term uptrend, but in order for this uptrend to continue, Bitcoin must break above a critical resistance area that is currently being probed.
The cryptocurrency’s 200-day moving average is just above $28,000, while $28,500 is a crucial resistance → support → resistance zone.
If Bitcoin can break above this critical area, a retest of $30,000 becomes a strong possibility.
It’s difficult to predict a quick breakout above this psychological threshold and new yearly highs above $31,800 in the near future when macro resistance remains so strong.
But the narrative could shift from macro to 2024, when the U.S. could approve a spot Bitcoin ETF (accelerating Bitcoin’s institutional adoption) and the halving (a historically bullish event).
The outlook for 2024 remains very strong, and Bitcoin options traders appear to agree.
According to data provided by The Block, the 25% Delta skewness for Bitcoin options expiring in 180 days remains very positive at around 5, indicating that investors continue to pay a premium for options that pay out in the event of an increase in Bitcoin prices versus an equivalent option that pays out in the event of a decrease in Bitcoin prices.
