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| By Sam Blumenfeld |
The numbers are in for the U.S. monthly jobs report, showing that unemployment fell to 3.5% with the addition of 263,000 nonfarm payrolls.
In response, Bitcoin (BTC, Tech/Adoption Grade “A-”) and the broader crypto market are down slightly today.
Normally, seeing unemployment drop in the latest jobs report would be a good thing. However, low unemployment levels typically correspond with higher inflation, which could add fuel to the fire in our current macroeconomic environment.
Essentially, a strong labor market allows the Federal Reserve to continue hiking interest rates until inflation subsides.
This could put a damper on the market’s recently increased optimism for a Fed pivot after the Bank of England announced a quantitative easing policy and the United Nations called for the end of rate hikes in advanced economies. While inflation continues to run rampant, the Fed has still not hinted at a willingness to compromise.
The good news for crypto is that it’s beginning to decouple from traditional equity market trading. Bitcoin’s correlation to stocks has declined over the past several weeks, while its correlation to gold has quietly reached a new yearly high.
Bitcoin is down about 1% so far today, currently trading at about $19,500 after a three-day stretch of recording slight losses. However, the asset still trades above its 21-day moving average, showing that the market leader has managed to mostly hold its ground.
BTC will likely continue swinging back and forth within its established range between $17,500 and $25,000 for now.
Here’s Bitcoin’s price in U.S. dollars via Coinbase Global (COIN):
Ethereum (ETH, Tech/Adoption Grade “A”) is down less than a percentage point during today’s trading, as it hovers around $1,340. Ethereum has traded sideways over the past two weeks, but it still tracks a 15% monthly loss while Bitcoin tracks a slight gain.
While the initial price action was discouraging to some investors, the overall success of the upgrade to proof-of-stake consensus could lead other blockchains to do the same in the future. Ethereum co-founder Vitalik Buterin expects to see other notable proof-of-work blockchains make the switch.
ETH sits almost exactly on its 21-day moving average, but it hasn’t been able to drum up any momentum recently.
However, if Ethereum can stage a rally, other altcoins that follow its direction should swing with it. The second-largest cryptocurrency by market capitalization should make a bigger move once institutions start increasing their exposure for the next bull market.
Here’s Ethereum’s price in U.S. dollars via Coinbase:
Index Roundup
The crypto market had a mostly uneventful trading week. None of the Weiss Crypto Indexes made a significant move, but performance varied slightly by market capitalization as the established cryptocurrencies slightly outperformed.
The Weiss 50 Crypto Index (W50) gained 1.68%, which isn’t significant considering the volatility of the space.
Meanwhile, the Weiss 50 Crypto Ex-BTC Index (W50X) increased 1.08%, showing that Bitcoin slightly outperformed other altcoins.
Breaking down performance this week by market capitalization, we see that the larger and mid-sized cryptocurrencies managed to outperform the more speculative projects. The small-caps were the only cohort to lose ground this week.
Large-cap cryptocurrencies gained the most, as the Weiss Large-Cap Crypto Index (WLC) rose 4.41%.
Mid-cap cryptocurrencies logged a positive week, with the Weiss Mid-Cap Crypto Index (WMC) growing 3.35%.
The small caps were the only losers, but the damage was minimal. The Weiss Small-Cap Crypto Index (WSC) lost 1.39%.
The crypto market mostly treaded water this week, but the larger and mid-sized cryptocurrencies managed to record slight gains. As the market moves closer to the end of the crypto winter, it will likely rely on the largest cryptocurrencies to establish the next upswing when the time is right.
Notable News, Notes and Tweets
- Pomp emphasizes how institution conviction continues growing for crypto.
- Crypto exchange FTX announced a partnership with Visa to roll out a debit card for payments in 40 countries.
- Historically, October is the best month for Bitcoin’s performance since 2014. It averages about a 20% positive monthly return.
What’s Next
While it’s good to see cryptocurrencies reducing their correlation to risk assets, they’re still very much in the woods when it comes to macroeconomic challenges.
A strengthening U.S. dollar makes it harder for other assets to rally in its terms, and the Fed’s economic tightening continues hurting crypto’s prospects in the short run. However, the crypto market should be approaching the end of its bearish cycle phase soon.
For now, increasing adoption and institutional positioning are creating an environment for crypto to lift off when conditions improve. With growing confidence in crypto and greater regulatory clarity likely coming soon, prices will eventually improve to reflect the industry’s strengthening fundamentals.
Best,
Sam
