Cryptocurrency prices look set to end the week near highs despite strong US jobs data underpinning Fed tightening expectations.
Bitcoin was last trading just above $21,500, while Ethereum found support above $1,200.
The Coinbase Bitcoin premium returned to positive territory again on Friday, suggesting a recovery in institutional demand.
Crypto Bulls Remain in Control
Amid impressive resilience in US stock markets in the face of the latest strong US jobs report and other US data this week that has pointed to resilience in the US economy, cryptocurrency prices remain near-weekly highs. Some analysts had been hoping for data this week to show a weakening of the US economy that might deter the Fed from tightening so aggressively.
But despite the strong data, crypto bulls remain in control. Though flat on Friday just above $21,500, Bitcoin is currently on course to post a weekly gain of over 12%. That would mark its best weekly performance since late March.
The cryptocurrency hit more than three-week highs in the mid-$22,000s on Friday. Analysts said technical momentum helped the world’s largest cryptocurrency this week following a bullish pennant breakout.
Meanwhile, the world’s second-largest cryptocurrency by market capitalization Ethereum found support above $1,200 on Saturday. ETH/USD is eyeing another run at resistance in the $1,280 area. The cryptocurrency is currently on course to post a weekly gain of roughly 14%. As with Bitcoin, that would mark Ethereum’s best weekly performance since March.
In terms of the major altcoins, Polygon, Avalanche, Uniswap and Solana are the best performers in the crypto top 20 of the last week. According to CoinMarketCap, their prices have risen between 20-30% in the last seven days.
Robust US Jobs Data Supports Aggressive Fed Rate Hike Timeline
Official labor market data released on Friday showed that the US jobs market remained healthy last month. Data released by the Bureau of Labor Statistics showed that 372,000 jobs were added to the US economy in June. That was more than the expected rise of 268K and only a slight slowdown from the pace of job growth in May.
The unemployment remained close to pre-pandemic levels at 3.6% as expected. The YoY rate of Average Hourly Wage growth fell a little to 5.1%, slightly higher than the expected 5.0% and still well above the Fed’s 2.0% inflation target.
Analysts interpreted the strong data as supporting the case for another 75 bps rate hike from the Fed later this month. Even prior to the latest jobs data, a few Fed policymakers have in recent days voiced support for such a move.
Money markets now imply a near 100% probability of a 75 bps hike to a 2.25-2.50% target range. Next week’s US Consumer Price Inflation data for June probably won’t affect this pricing. If there was a big downside surprise, markets would likely instead reduce their expectations for tightening beyond September and in 2023.
Bitcoin will Recover, But it Could Be a Bumpy Road, Says Rockefeller International Chairman
Rockefeller International Managing Director and Chairman Ruchir Sharma said in an interview on CoinDesk that Bitcoin could make a comeback similar to the stock price of e-commerce giant Amazon. During the so-called dot-com collapse of the early 2000s, Amazon’s share price fell by as much as 90%. But Sharma noted that it recovered over 300x in the subsequent 20 years.
Bitcoin could follow a similar trajectory given that it is a fundamentally good idea, Sharma argued. But first, “we need the excesses to get weeded out,” he said. Sharma warned that the current collapse may not yet be complete and the next six months could be difficult.
Again, using stocks as a reference, Sharma noted that bear markets on Wall Street typically last about one year and see stocks drop around 35%. But the current bear market is only six months old and has seen the S&P 500 lose around 20%. “I’m not willing to call the bottom as of yet on bitcoin and cryptocurrencies,” he said.
CryptoQuant CEO Ki Young Ju noted on Twitter on Friday that the premier of BTC/USD on Coinbase versus BTC/USDT on Binance turned positive for only the second time since April. According to CryptoQuant data, the premium rose as high as 0.075 on Friday, though it has since fallen back into modestly negative territory.
Still, versus this time last week, the premium is higher. Ki Young Ju explained that Coinbase is the main platform used by major US institutions to trade in Bitcoin. A negative premium suggests these institutions are selling. However, the premium fell almost as low as -0.2 last week. Its recovery back towards zero suggests an improvement in institutional sentiment.
The risks and weaknesses of crypto are essentially the same as for traditional finance (TradFi), Brainard argued. “Some platforms combine market infrastructure and client facilitation with risk-taking businesses like asset creation, proprietary trading, venture capital and lending”, she noted, activities that are required to be separated in TradFi.
Crypto thus needs to meet similar safety standards before it grows large enough to threaten US financial stability, Brainard stated. “Strong regulatory guardrails will help enable investors and developers to build a resilient digital-native financial infrastructure,” she concluded.
