Crypto markets are in the red, Bitcoin falls below $70,000 and large-cap altcoins sell off.
Cryptocurrency markets tumbled after investors reacted to stronger-than-expected U.S. jobs data that outperformed expectations suggesting the labor market is coping better with tightening fiscal policy forecast.
On June 7, the U.S. Department of Labor reported the addition of 272,000 jobs in May, well above estimates of just 185,000 and significantly higher than April's 165,000.
In May, the unemployment rate rose to 4.0% for the first time since January 2022, compared with estimates of 3.9% and 3.9% in April.
This latest jobs data may have reduced the likelihood of the US Federal Reserve (Fed) lowering interest rates — a key prerequisite for increasing liquidity into risk assets and cryptocurrencies .
The Federal Open Market Committee (FOMC) is scheduled to meet on June 12 to discuss interest rates, with markets currently holding little prospect of a rate cut from the next two meetings.
According to the CME FedWatch tool, traders are betting on a rate cut on June 12 at just 0.6% and July 31 at 8.88%, 46% for September and 47.4 % for November at the time of writing.
Target interest rate probability for June 18, 2024 Fed meeting | Source: CME
This outlook is negatively affecting risk assets such as cryptocurrencies, emerging market stocks, bonds and even commodities.
Bloomberg chief economist Anna Wong commented on the data saying that the rising unemployment rate is a more important indicator of the real state of employment in the country.
“We believe the latter model now provides a better approximation of the actual numbers than payroll, as the BLS model for estimating corporate birth and death rates – added 231,000 jobs to the print May non-farm payrolls – are lagging behind the reality of increased facility closures and a decline in business activity. We think the current job growth rate may be less than 100,000 jobs per month.”
More than $380 million in liquidations accompanied the collapse of the cryptocurrency market
The liquidation of Long positions relative to Short positions in the broader crypto market has continued to fuel the underperformance of digital assets today.
Notably, the crypto derivatives market saw more than $387.83 million liquidated in the past 24 hours, of which $348 million were Long orders. More than $249 million in leveraged positions were liquidated in just the past hour.
Total Liquidated Cryptocurrencies | Source: Coinglass
More than 133,576 traders were liquidated in the last 24 hours, the largest single liquidation occurred on the OKX exchange for $5.20 million USD related to ETH/USD trading.
When Long positions are liquidated, it often involves selling off assets (either voluntarily or by the broker), which can cause the price to fall further.
The market capitalization RSI shows a bearish divergence
Total market capitalization has been increasing since May 1 and gained momentum on May 20 as anticipation and eventual approval of spot Ethereum ETFs boosted the broader crypto market get higher.
The daily chart shows a bearish RSI divergence ahead of today's decline. The RSI is a trend-following momentum indicator used to assess whether the market is overbought, oversold, or consolidating.
Bearish divergence from the RSI occurs when rising prices are accompanied by decreasing momentum, resulting in a downward movement.
Cryptocurrency Market Cap Chart | Source: TradingView
The bearish divergence could be a hint that the bears are in control of the market and may have plans to pull the total market capitalization towards the 100-day simple moving average (EMA) at $2,402 in Short-term.
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