Written by: Mary Liu, BitpushNews
Cryptocurrency markets were in a tight range on Tuesday. Bitcoin traded near $63,000 in the early hours of the morning, then fell after Powell’s comments, hitting a low of $61,730 in the afternoon. It recovered to $61,901 at press time, down nearly 2% in 24 hours.
Altcoins mostly followed Bitcoin’s decline, with the top 200 tokens by market cap seeing more declines than increases.
BinaryX (BNX) was the standout performer, up 21.4% and trading at $0.9755, Arcblock (ABT) was up 9.8%, and Helium (HNT) was up 6.5%. Pendle (PENDLE) was the biggest loser, down 14.1%, followed by ether.fi (ETHFI) down 10.3%, and Aave (AAVE) down 8.3%.
The current overall market value of cryptocurrencies is $2.29 trillion, with Bitcoin accounting for 53.2% of the market.
As for U.S. stocks, at the close, the S&P, Dow Jones and Nasdaq indices all rose, up 0.62%, 0.41% and 0.84% respectively. Both the S&P and Nasdaq indices closed at record highs.
Fed, jobs data drive markets
The latest data from the Bureau of Labor Statistics showed that the number of job openings in the United States was 8.14 million at the end of May, up from 7.92 million in April. Market watchers are now looking forward to the June employment report due on Friday, hoping that the report will provide more evidence that the labor market is cooling, thereby supporting interest rate cuts.
Earlier in the day, Powell said in his speech that he was encouraged by the cooling of inflation, and that the two inflation data in April and May showed that "the Federal Reserve is shifting to a deflationary path", but declined to comment on the timing of the first rate cut, reiterating that more evidence of progress was needed before cutting rates.
“We’ve made a lot of progress,” Powell said. “We’re just trying to understand whether the levels we’re seeing are a true reflection of where underlying inflation is going.”
André Dragosch, head of research at ETC Group, commented: “As US employment data typically contains lagging indicators, with only a few exceptions such as initial jobless claims, we expect US employment data to also deteriorate in the coming months, similar to the pattern observed for housing and other leading indicators. More importantly, there is growing evidence that the latest employment data should be viewed with caution.”
"While the latest nonfarm payrolls for May exceeded consensus expectations, the 'fine print' of the jobs report suggests that U.S. labor market conditions are clearly weakening," he said.
Dragosch highlighted some recent “negative surprises” in the labor market, saying these “led to a further repricing of benign global growth expectations as market participants increasingly factor in the likelihood of a U.S. recession.”
Meanwhile, the major U.S. large-cap indices hit all-time highs in June, however this occurred amid weakening market breadth as the bottom 490 stocks generally underperformed the top 10 large-cap stocks in the S&P 500. Therefore, polarization in traditional equity markets also portends increased risk of recession and correction.
Dragosch said: "The risks for Bitcoin and other crypto assets are that, first, major large-cap stock indices such as the S&P 500 still show relatively high correlation with major crypto assets. Second, global growth expectations remain the main macro factor for Bitcoin's performance."
He noted that both the S&P 500 and Bitcoin are currently dominated by global growth expectations in terms of macro factors, which also explains the high correlation between the two markets. U.S. Treasury liquidity is "a potential systemic risk that could support Bitcoin and crypto assets," and pointed out that available liquidity "is currently worse than during the 2020 COVID-19 pandemic," which could mean increased Treasury volatility and that the Federal Reserve itself may need to intervene in the bond market (i.e., quantitative easing), which may also require interest rate cuts like it did in 2019.
If the Fed restarts the easing cycle and the dollar weakens, this will be good for Bitcoin and crypto assets. Major central banks around the world have already cut interest rates this year, such as the Bank of Canada, the European Central Bank or the Swiss National Bank. Therefore, the liquidity situation seems to have begun to change.
Dragosch said: "We believe that a potential recession in the United States and the rising risk of seizures in the U.S. Treasury market are the main catalysts for the Fed to eventually shift its policy this year. Unless global risk appetite rises again, our base case remains a short-term consolidation until the positive effects of the halving begin to emerge around August 2024. That said, due to the recent correction, valuations have become more attractive and BTC is now close to "fair value." "
$65,000 is the resistance level
“In the short term, we should expect some resistance around the $65,000 level as short-term market speculators may seek to exit positions at the ‘breakeven’ level,” analysts at Blockware Intelligence said in the latest edition of their newsletter. “Last summer, when BTC lost STH [Short Term Holder] RP support, the price moved sideways for two months before finally breaking out again.”
This was also mentioned by independent analyst Ali Martinez on X Platform, who said that based on a measure of market value versus realized value, BTC price could face resistance above $65,000.
Martinez said that a break above this level could pave the way for Bitcoin to rise to $78,700.
Meanwhile, Thomas Fahrer, founder of cryptocurrency company Apollo, is more optimistic about Bitcoin breaking $65,000. He declared in a July 2 X post: "$940 million of Bitcoin short positions will be liquidated at $65,000. The first rule of Bitcoin is don't short, money will flow in, and short sellers will be punished."
