Why Is The Crypto Market Down Today?
Following a slight pullback of 0.48% on Thursday, Bitcoin experienced a significant downturn the previous evening. The price of Bitcoin dropped by 2.05% on Friday, causing a major reversal in the previously uptrending top altcoins and the entire crypto market.
Ethereum’s price fell by 3.56%, while Solana dropped by 4.49%, with these top altcoins retracing to their nearest support levels. The meme coin sector, which had been performing well over the past few weeks, was hit hard, with top performers like PEPE dropping by 10.49%, Floki by 11.87%, and WIF by 11.58%.
The overnight bearish turnaround in the crypto market wiped out $360 million in long liquidations, according to Coinglass. Meanwhile, U.S. Bitcoin ETFs maintained a positive outlook with a daily total net inflow of $130.99 million, with IBIT accounting for most of the $168 million inflow. This marks the 19th consecutive positive day but also reflects a declining trend in inflows following the second-biggest daily inflow of $886 million on Tuesday.
The U.S. Jobs Report and Bitcoin Crash
On June 7th, Bitcoin’s price fell from $70,771 to $69,326 by the end of the day, an intraday drop of 2.05%. This sudden move by the leading cryptocurrency was significantly influenced by the U.S. May Jobs report released by the Labor Department yesterday.
The Labor Department reported an addition of 272,000 jobs last month, far exceeding the expected number of 185,000 and significantly higher than the previous month’s 165,000 jobs.
Additionally, the unemployment rate increased, peaking at 4%, reaching levels not seen since January 2022.
The Real Impact of the Jobs Report on Crypto
With the rising unemployment rate in the U.S., the crypto market quickly reacted as profit-taking began. But why? Despite rising unemployment, the Federal Reserve is unlikely to cut interest rates in the near future. This could be because other economic indicators, such as job growth, suggest the economy remains strong.
If the Fed cuts rates too soon, inflation could increase, which is already a concern.
So, why did the market fall? In simple terms, the employment data reduces the likelihood of the Fed cutting rates. The broader market had anticipated a rate cut at the upcoming Federal Open Market Committee (FOMC) meeting on June 12.
Why Does the Crypto Market Need a Rate Cut?
With a potential rate cut, the market would experience a boost in demand due to lower borrowing costs, increasing liquidity. Hence, rate cuts are the next catalysts to fuel a bull market and drive the prices of Bitcoin and altcoins higher.
Will Bitcoin Continue the Uptrend?
After the overnight crash below the $70,000 level, Bitcoin is trading at $69,343 at a slow pace. With no major movement in the early Asian hours, a Doji candle is visible, trying to find support.
On the daily chart, the Doji candle attempts to take support at the 23.60% trend-based Fibonacci level. However, the crypto price action shows a bearish engulfing candle formed last night, completing an evening star pattern.
Additionally, the constant rejections at and above the $70,000 mark indicate significant supply at this psychological level. The upward-trending 50-day EMA might soon provide dynamic support, with the daily RSI staying above the halfway line.
Therefore, the overnight pullback is likely a quick FUD reaction to the employment data. This suggests a potential recovery in the crypto price could reach $71,000 before the June 12 FOMC meeting.
Due to the recent hawkish data, the possibility of a sharp move in Bitcoin on the day of the FOMC meeting is high.
By Andrej Kovacevic
Updated on 14th July 2024