10/7 BTC market analysis:
Two-level reversal? The non-farm payrolls data exceeded expectations, which was bearish for the market, but the market rebounded quickly after a sharp drop. Is the bull market really about to start?
Hi, ladies and boys, welcome to Uncle Cat's Coin Talk. It's your first day back from the holidays, how are you doing?
As of the time of posting, Bitcoin is priced at around 28,000. The market fell 600 points after the big non-farm data last night and then rebounded strongly. Currently, the daily active volume in the Asian market is gradually increasing in the afternoon. Technically, the 1-hour and 4-hour daily Bollinger bands are showing a fluctuating upward trend. Is the bull market really about to start?
In fact, from a purely technical perspective, there are indeed frequent signals of bottom fishing and long positions, but the single technical aspect of the market is often deceptive. We can judge the short-term market conditions, but for the big trend issues, we need to combine more factors.
Last night's non-farm payrolls data must have shocked many people. My expectation was that it would be close to 17, which was basically in line with expectations and would not affect the Fed's excuse for raising interest rates. However, the published value was 33.6, even twice as high as expected, which was a very exaggerated value. Once the data was released, many people suspected that the US Bureau of Labor had falsified the data, and the data had already served the government. In fact, I personally think that we don't have to worry about whether the data is true or false. The reason for the Fed's interest rate hike remains unchanged, and there is nothing we can do about it. And this kind of large-scale data is bad for the venture capital market. Many people did not expect a sharp drop, but instead rebounded quickly after accelerating the decline of 600 points. The support is quite strong. Especially in the European and American trading hours in the second half of the night, there was no recent selling, but an increase in buying. At 5 a.m., large investors or institutions directly bought, and the 1-minute line directly came to around 28,450. It was a very unexpected increase. Although the market did not continue to maintain, but was instead under pressure to pull back, it continued to bring heat to the market.
Many of you may not understand why the US stock and crypto market rebounded wildly despite the negative data? Let me explain it to you.
First of all, the non-agricultural employment data value is 336,000, which is significantly ahead of the expected value. It is bearish for the risky financial market as a whole, but from the data point of view, it is good for the US economy. The increase in the number of employed people shows the strong momentum of the US economy, indicating that the number of jobs in US companies has increased. The increase in jobs by companies is definitely not a loss-making business. It must be because the companies are developing well and their own labor demand has increased. Therefore, the increase in non-agricultural data can be understood as the good state of US companies, or even better, and it also shows the strong resilience of the US economy from a certain perspective. The bearish market sentiment comes from the fact that the positive US economy may increase the possibility of the Fed raising interest rates. Of course, once the data is released, the Fed's expectation of raising interest rates by the end of the year has risen from 46% to 56%, and the crypto market has directly fallen 600 points.
Why is the market rising?
In fact, from the perspective of interest rate hike expectations, the previous expectation was 46%, and then the data release increased expectations, but did not change the result. The bad news landed, and everyone's panic about future interest rate hikes was digested because the market fell by 600 points. When the money rebounded, everyone had already acquiesced to the future of interest rate hikes, and the mood after that may not be affected too much by the panic of interest rate hikes. Unless the expectation of interest rate hikes is further increased.
After the data came out, the US dollar index and the US bond market fell frequently. Many people may ask, didn’t the US bond rise? Yes, the yield of US bonds rose, but the price of US bonds itself fell. Because US bonds have their own independent calculation mechanism. Therefore, the decline in the price of US bonds will continue to push up the yield of US bonds. The yield of US bonds is calculated based on the initial income amount, divided by the current US bond price and multiplied by the percentage. In other words, if the interest of a certain bond is fixed at 100 US dollars, if the original bond price is 1,000 US dollars, the yield calculation method is: (bond interest divided by bond price) multiplied by 100% = 10%. If the bond falls to 900 US dollars, the yield calculation is: (100 divided by 900) multiplied by 100% = 11.11%, and the yield is increased.
The way this situation is caused is that the increase in the US federal funds rate, that is, the interest rate hike, has led to an increase in banks' borrowing costs. In this case, the yield on old bonds in the bond market is not as high as that on newly issued bonds. In order to attract more retail investors to buy bonds, banks or companies continue to issue new bonds. The total supply of bonds in the market exceeds demand, and the price of old bonds will fall. According to the above formula, as bond prices fall, the yield on US Treasury bonds continues to rise.
After the release of the big non-agricultural data, the price of US bonds fell, and the US dollar index also fell, partly due to the phenomenon of capital repatriation. Some of the funds that previously went to the US dollar index and US bonds were for risk aversion, because they were worried that the US economy would decline or even collapse under the continuous interest rate hikes of the Federal Reserve. In order to pursue more stable profits, they chose US bonds, and in order to avoid risks, they chose the US dollar. When the data last night was greatly beneficial to the US economy, the market's risk aversion funds may gradually be withdrawn, and the investment funds hiding in US bonds also turned from stability to the venture capital market again because the positive US economic situation stimulated the US stock market.
In fact, the rebound of the US stock market is easy to understand. Although the data is bearish for the investment market, it also shows the stability and profitability of American companies, which greatly stimulates the growth of the stock market. Previously, investors who hedged or switched to stable funds such as US bonds are now actively returning to the stock market, and some of the funds will also flow back to the crypto market.
Especially when the crypto market only fell 600 to stop rebounding under such negative data, the capital outflow was aggravated. Seeing this, many people may ask, I analyzed the factors of the rise above, is it because I want to turn to the bulls?
No, that is not the case. At least for now, I cannot judge that the market has turned bullish.
Several factors contributed to the rise in the holiday market. The Asian trading hours contributed a lot of volume, while the European and American markets were mostly selling during the holidays. I have analyzed the reasons for the increase in the Asian market before. On the one hand, because the stock market was closed during the holiday, funds came out for risk aversion, and some funds came to the crypto market. Another reason is that the continuous interest rate hikes in the United States have greatly suppressed the exchange rate of soft girls, causing some soft girls to enter the investment market to buy the bottom of the pie for risk aversion. Although it lasted for a short holiday, I am still not sure whether this fund will remain after the stock market opens next Monday. If the stock market opens on Monday and the funds do not return to the stock market, or if they increase as much as during the holiday, it will become one of the factors for short-term bullishness.
On the other hand, in terms of the overall macroeconomics, the U.S. economy is greatly positive from the data alone, but such a large rebound in data has also greatly reduced the accuracy of the U.S. Bureau of Labor Statistics statistics for many investors and even the American people. To put it bluntly, the trust has declined. If there is really a case of falsified data, then the data will gradually become a toy, and the positive U.S. economic data will become a joke. It is difficult to say whether the U.S. economy will suffer irreparable damage under the pressure of long-term high interest rates. Certain major economic problems have been exposed, and it is hard to say how long the capital return to the investment market can last. After all, the current U.S. data is good, but on the other hand, strikes in the United States have never stopped. If the business performance is really good, why are there still large-scale strikes? This is worth pondering.
On the other hand, recent global stablecoin statistics show that the stablecoin market is gradually shrinking, and the market retention and circulation are decreasing, which means that funds in the stablecoin market are flowing out, and the corresponding purchasing power will also decline. I have been saying before that if a bull market or the early stage of a bull market is really going to come, the necessary market hotspots will bring more traders and trading funds to solve the problem. The market launch requires real money and heat, and cannot rely on blind enthusiasm and imagination. After all, imagination cannot bring buying volume to the market.
Of course, from recent observations, there has been an increase in the Asian market during the long holiday, and the European and American markets have also begun to increase their buying volume after the non-agricultural data yesterday. If the market continues this situation after next Monday, and there is no major hidden crisis, it is indeed possible to turn long in the short term and follow the short-term trend. After all, we need to trade flexibly. However, if the general trend turns to long and the bull market starts, based on all the current data, I still cannot agree with this view, and more data support is needed.
As for trading strategies, today is Saturday. My personal suggestion is that considering the low liquidity over the weekend and the short-term trend based on the trading situation next Monday, I do not recommend opening or building positions, and it is better to stay in short positions and wait and see.
Thank you for following Uncle Mao’s Coin Talk. I wish you all a smooth start to your work and a prosperous career!
