The Bitcoin price has surged back into the mid-$61,000 range following a weaker-than-expected US labor market report that has increased hopes for multiple interest rate cuts by the Federal Reserve before the end of 2024. The US economy added 175,000 jobs in April, below the Wall Street consensus of 240,000 job gains, with the unemployment rate rising to 3.9%, above the expected 3.8%. This data has led to a rise in the likelihood of the Fed cutting interest rates more than once before the end of 2024, prompting traders to increase their rate cut bets. This has put pressure on US yields and the US dollar, with the DXY falling below 105 and US 10-year yields decreasing to 4.5% from above 4.7% the previous week.
The improving macroeconomic conditions and easing financial conditions in traditional markets have injected bullish momentum back into the crypto market, with the S&P 500 hitting its highest in over two weeks above 5,100. However, it remains to be seen whether the Bitcoin price can break out of its recent bearish trend channel. To confirm a breakout, the price would need to push above $64,000. Investors have reacted positively to the data, interpreting it as a sign that the rise in inflationary pressures seen in the first quarter of 2024 may be temporary. However, it is a risky assumption to make based on a single jobs report that was not particularly weak.
There is a risk that markets may be getting ahead of themselves in anticipating a trend of labor market weakness that could bring down inflation and prompt faster rate cuts by the Fed. If this does not materialize, Bitcoin could be at risk of a correction. Additionally, post-halving rallies typically do not gain momentum until 4-6 months after the halving event, meaning the near-term outlook for Bitcoin remains towards consolidation below its all-time highs set in March. At present, there is strong resistance in the $63,000 range, and failure to break above this level could lead to a drop towards $53,000 support.
Despite the near-term uncertainties, the long-term fundamentals for Bitcoin remain bullish. A pullback to the low $50,000s would present an attractive opportunity for bulls to re-enter the market, as historical data shows that Bitcoin pullbacks during bullish cycles typically do not exceed 30%. Additionally, factors such as expected interest rate cuts by the Fed and continued inflows into spot Bitcoin ETFs suggest positive long-term prospects for the cryptocurrency. Institutions like BlackRock are also playing a role in educating clients on the benefits of investing in Bitcoin, further bolstering its potential as an attractive asset class for institutional investors.
While the next major rally for Bitcoin may not occur until later this year, investors could consider dollar-cost averaging into the asset at the current levels. It is important to note that investing in cryptocurrencies, including Bitcoin, carries a high level of risk, and individuals should conduct their own research and due diligence before making investment decisions in this volatile asset class. This article serves as informational content and does not constitute investment advice.
