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Crypto prices have risen over the past month.
Dreamstime
Bitcoin
and other cryptocurrencies rose on Friday as the US jobs report loomed over markets, with the latest indication of the strength of the economy likely to play an influential role in the next near-term swing for digital assets.
The price of Bitcoin has risen 1.5% in the past 24 hours to around $23,200, approaching a recent peak above $24,000, representing the high-water mark of a rally that carried the biggest digital asset up from around 19 000 dollars in the last month. Bitcoin is still trading at around a third of its peak value as of November 2021.
Investors will watch the US jobs report later on Friday as a key catalyst. Economists expected the U.S. to add 258,000 jobs last month as growth slowed, reflecting the effects of inflation, higher interest rates and a slowing economy. The health of the economy is a key indicator at the moment amid expectations that the Federal Reserve will continue to tighten monetary policy in a bid to curb red-hot inflation, which is at a four-decade high.
The Fed has already raised interest rates four times this year, including two mega 75 basis point rate hikes in June and July – the largest since 1994 – and is expected to continue raising rates this year before pulling back in 2023. The risk is that a bump in economic demand, although it should bring inflation under control, could lead to a recession.
Signs that the economy is weakening, such as a worsening labor market, could stem Fed tightening. This is important for crypto because a more aggressive Fed raises the prospect of recession, which is an economic environment that would be far from friendly to risky plays like Bitcoin.
Bitcoin is likely to rise if the jobs data turns to the downside — indicating a weaker economy and likely tame Fed — and slip if the jobs number comes in strongly, signaling a stronger economy that can handle a more aggressive central bank.
The expected reaction to the jobs report represents the correlation between crypto and other risk-sensitive assets, such as stocks, which has strengthened over the past year. While digital assets react to factors within crypto itself, such as the meltdown of stablecoin Terra or the failure of hedge fund Three Arrows Capital, Bitcoin and its peers have largely followed
S&P 500
and
Nasdaq
lower, and then higher, in 2022.
But that correlation has weakened recently — in a bad way for Bitcoin.
“Seven straight daily red lights for Bitcoin as stocks have captured a bid,” Dylan LeClair, analyst at crypto fund UTXO Management, said via Twitter. Red candles refer to a session where Bitcoin closed lower on the day.
“Bitcoin has acted as stock market beta throughout 2022, and is now selling off in an uptrend,” LeClair added. “If/when stocks go over next, expect a fire sale.”
Beyond Bitcoin,
Ether
—the second-largest token—gained 2.5% to $1,650. Smaller cryptos, or altcoins, were just as strong, too
Solana
up 4% and
Cardano
2% higher. Memecoins showed much of the same, as
Dogecoin
and
Shiba Inu
advanced 4% and 2% respectively.
Write to Jack Denton at [email protected]
