Is the Strong NFP Report Bullish or Bearish for Bitcoin? Cryptoasset Weekly Update (October 5, 2024)

BTC/USD & ETH/USD Key Points

• Friday’s strong jobs report means the Fed is less likely to cut interest rates aggressively, but a strong economy nonetheless should support risk assets.
• ETF outflows and falling prices have shifted the market back to a more fear-based perspective.
• “One step forward, one step back” price action continues for Bitcoin and Ethereum amidst macroeconomic crosswinds.

Cryptoasset Market News

• Robinhood introduced crypto transfers in Europe.
• “Thousands” reportedly signed up for the Trump-endorsed World Liberty Financial on the first day.
• Per Bloomberg, Japan is set to review its rules on crypto in the coming months, potentially clearing the way for an ETF
• Crypto exchange Deribit reported nearly $1B in Bitcoin options at the $100K strike price, the highest open interest of all prices.
• Bitwise filed for a spot XRP ETF.
• A new HBO documentary releasing Oct. 8th claims to have uncovered the true identity of Satoshi Nakamoto. The current odds-on favorite on Polymarket to be named is Len Sassaman.

Once again, this week’s crypto-specific news was dwarfed by macroeconomic developments (see below for more), but there are still some stories for traders to chew on. Beyond individual company-level analysis, Japan is reportedly set to review its crypto regulations in the coming months; nothing happens quick in the island nation, but it is indicative of the global trend in favor of a more lenient regulatory structure toward the crypto industry.

The other notable story was the announcement of an HBO documentary on Satoshi Nakamoto which purports to reveal the official identity of Bitcoin’s pseudonymous creator. After similar such “exposés” ultimately made unconvincing cases based on anecdotal and circumstantial evidence, most crypto fans are skeptical that it will be legitimate, but you never know. Ultimately, we have more than 15 years of Bitcoin functioning as intended, the vast majority of that without Satoshi involved, so unless the documentary props him/her to sell, it’s unlikely to have a tangible impact on price in my view.

Macroeconomic Backdrop

At this time last week, traders were excited at the prospect of continued aggressive interest rate cuts around the globe… and to an extent, we got some confirmation of that over the last week. For instance, high-level policymakers at the European Central Bank and Bank of England hinted that interest rate cuts may come sooner and more aggressively than expected…

But the proverbial “Big Kahuna” of the central banking sphere, the Federal Reserve, clearly saw reason to shift to a less dovish posture over the last week. Friday’s blowout Non-Farm Payrolls report showed 100K more jobs than expected were created, at higher wages than expected, the unemployment rate fell, and the previous months’ job growth figures were collectively revised higher by more than 70K. This strong jobs report prompted traders to drastically cut bets on another 50bps rate cut from Jerome Powell and company.

While the prospect of a strong labor market (and by extension, economy as a whole) in the US is an optimistic prospect for all risk assets, Bitcoin included, the expectation of fewer interest rate cuts may hurt Bitcoin’s “non-sovereign store of value” use case in the short term, giving new crosswinds for traders to navigate.

Sentiment and Flows

The sentiment gauge we watch most closely, the “Crypto Fear and Greed Index,” fell to 41 last week. Overall, it remains on the lower end of its 1-year range, but still far from either the bullish or bearish extremes that can provide a strong contrarian signal:

Source: Alternative.me

Another way of gauging sentiment, flows into exchange-based cryptoasset investment vehicles, flipped negative last week. As of writing before the release of Friday’s data, Bitcoin ETFs have seen solid outflows of -$300M over the last four days. Over the long-term, inflows from “tradfi” investors provide incremental demand for Bitcoin and could help support the price.

Source: Farside Investors

Bitcoin Technical Analysis: BTC/USD Daily Chart

Source: StoneX, TradingView

As the chart above shows, it remains a “one step forward, one step back” technical environment for Bitcoin. After rallying above $65K to set its first “higher high” since March, the cryptocurrency saw its reversed last week and fell to 3-week lows near $60K. From a bigger picture perspective, we’ll be waiting for a breakout of at least the channel top near $68K to shift the medium- and longer-term biases back in favor of the bulls.

Ethereum Technical Analysis: ETH/USD Daily Chart

Source: StoneX, TradingView

Ether saw a similar reversal of its previous gains, falling back below the $2400 level as of writing. The second-largest cryptoasset is once again trading below its 50-day EMA near $2600, leaving it vulnerable to a move back down to the year-to-date lows near $2125. Bulls will want to see ETH/USD regain key previous-support-turned-resistance at $2850 to paint a more bullish picture for Ether, whereas a break below $2125 support could set the stage for a continuation toward the next level of support near $1700.

-- Written by Matt Weller, Global Head of Research

Check out Matt’s Daily Market Update videos and be sure to follow Matt on Twitter: @MWellerFX