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Bumpy Ride Likely for Bitcoin After Strong US Jobs Report, But On-chain Metrics Still Screaming Bull Market

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Friday was a shaky, indecisive day Bitcoin The market, where prices swung between losses and gains of about 1.0%, as traders digested the latest stronger-than-expected US labor market report for last month. According to latest data From the US Bureau of Labor Statistics, the US economy added 517,000 jobs last month, far exceeding expected job gains of 190,000, while the December figure also saw a revision of 30,000 to 260,000.

Meanwhile, the household survey showed the unemployment rate falling to a five-decade low of 3.4%, despite an increase in the participation rate. Average hourly earnings continued to grow at a solid YoY pace of 4.4%, which slightly exceeded expectations. The report beat economists’ expectations across the board.

A senior economist at BMO Capital Markets commented to the financial press that the report “raises serious doubts about the economy slipping into recession and whether the Fed will end its tightening cycle this spring”. Other analysts expressed skepticism about the headline NFP number, citing the risk of further major revisions.

Either way, even with possible future revisions, the “real” number is probably still going to be a tad steep. As a result, yields on the US Treasury curve and the US dollar rose, while initially sending US stocks and Bitcoin Initially fell.

However, buyers flocked to favor riskier assets, perhaps on the hope that the latest data increases the likelihood that the US Federal Reserve is able to achieve its much-anticipated “soft landing” – where it will be able to bring inflation down without it. Adequately tightens the policy for sparking a recession that causes massive job losses. However, bitcoin was unable to sustain a rally, and is currently trading slightly lower on the day.

Bitcoin Could Suffer in the Short Term

Despite intra-day recovery, Bitcoin Could still fall, many crypto traders and analysts opined via social media. WSB trader Rocko said “expecting lower highs will send bitcoin”.

“Analysts remain bullish on the cryptocurrency, but $25,000 target could be a tough one to reach,” said Krypton AI.

Indeed, others pointed to a more prolonged decline in the price of gold, which was down about 2.5% on the day, now back about 5% from the multi-month high it printed at $1960 the day before. .

This may not sound like a big step in the world of crypto, but for gold, a typically much more stable asset, it is huge. And it is representative of a significant degree of tightening of financial conditions in light of this data, as traders revise down their Fed tightening expectations.

Looking at bitcoin from a technical perspective, if pessimism regarding tighter financial conditions encourages bullish profit-taking, the cryptocurrency could be in for a short-term decline towards support in the $22,500 area, where some recent lows and 21-week highs have been found. Remains the -day Simple Moving Average (SMA). Beneath this, the $21,500 is the next major near-term support area.

But On-Chain Metrics Are Screaming Bull

But even in the instance where the US economy avoids a recession, inflation takes a little longer to come down and the Fed has to keep interest rates above 5.0% for the remainder of the year, many think bitcoin It is unlikely to return to a new cycle of ups and downs. One reason for this thinking is that a confluence of on-chain indicators are shouting that the bear market is over, for the first time in a long time.

As discussed in a recent articleSeven out of eight key on-chain and technical indicators tracked by crypto analytics firm Glassnode’s “recovering from bitcoin bears” are now indicating that the next bitcoin bull market could be here. Glassnode’s dashboard analyzes whether bitcoin is trading above dominant pricing models, whether network usage is picking up momentum, whether market profitability is returning, and whether the balance of USD-denominated bitcoin wealth is shifting to long-term HODLers. is in favor of

Separate on-chain indicators such as Bitcoin’s reserve risk and MVRV-Z score are also sending bullish signals. as discussed recently ArticleBitcoin Reserve Risk has recently dropped to its lowest levels, indicating that HODLer conviction is nearing record highs.

According to Glassnode, Reserve Risk is used to “assess the confidence of long-term holders relative to the price of the native coin at any given time”. Reserve risk is “a long-term cyclical oscillator that models the ratio between the current price (incentive to sell) and long-term investor conviction (the opportunity cost of not selling)”.

Meanwhile, the MVRV-Z score, which “compares market value and real value to assess when a property is over- or under-valued,” according to Glassnode, has recently been down after a long period. A sustained recovery above zero is achieved. This has historically happened at the beginning of a bull market.

Bitcoin is also expected to experience this soon only Seventh “Golden Cross” (where the 50-day SMA crosses above the 200-day SMA over the last 10 years). When these periods are followed by a bear market, they are generally excellent medium to long term buy signals. Given the above, it looks like there will be a lot of demand for bitcoin at key support levels if (and when) it breaks.

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